3/8/25
Financial Institutions, Inc. (NASDAQ: FISI) might not be the most well-known bank stock, but for investors seeking income, it’s worth a closer look. Based in New York, this regional bank operates through Five Star Bank and offers a variety of financial services to individuals and businesses. While it doesn’t have the national presence of larger banks, it does have a track record of paying dividends and trades at a valuation that could interest value-focused income investors.
That said, recent earnings struggles and a hefty debt load raise questions about long-term sustainability. Let’s dive into the dividend details and overall financial health to see whether FISI is a strong candidate for a dividend portfolio.
Key Dividend Metrics
📌 Dividend Yield: 4.60%
📌 Annual Dividend: $1.24 per share
📌 Payout Ratio: 37.85%
📌 5-Year Average Dividend Yield: 5.03%
📌 Ex-Dividend Date: March 14, 2025
📌 Next Dividend Payment Date: April 2, 2025
Dividend Overview
For income investors, FISI’s dividend yield of 4.60% is an attractive feature. That’s well above the average yield of the broader market and sits comfortably within the range of solid income-producing bank stocks. The company has been a reliable dividend payer, currently offering an annual payout of $1.24 per share.
The payout ratio, sitting at 37.85%, suggests that the dividend is well-covered by earnings. That’s a key factor in assessing sustainability—when banks keep their payout ratios in check, they leave themselves room to manage economic downturns without cutting dividends.
While the dividend itself looks solid, the company’s financial struggles introduce some concerns. FISI recently reported negative net income, which isn’t ideal for long-term dividend security. If profitability doesn’t rebound, it could affect future payout stability.
Dividend Growth and Safety
FISI has maintained its dividend for years, but its growth has been relatively slow compared to other banks. While many financial institutions have aggressively increased dividends following strong post-pandemic earnings, FISI has taken a more measured approach.
One positive factor is the company’s historically conservative payout ratio. That has helped FISI maintain payments even during tough times. However, recent financial data shows that the company reported a net loss of $25.98 million, which is a red flag for future dividend growth. If profitability remains an issue, management may decide to slow down or pause increases to protect capital.
The ex-dividend date is fast approaching on March 14, 2025. Investors who want to collect the next dividend should make sure they own shares before that date.
Chart Analysis
Price Movement and Trend
The chart for Financial Institutions, Inc. (FISI) shows a steady uptrend over the past several months. The stock climbed significantly from mid-year, with a strong breakout in late summer that saw prices surge well above the 50-day and 200-day moving averages. After reaching a peak, the price has settled into a more gradual upward trend, staying above the long-term support of the 200-day moving average.
Currently, the stock is trading just under its 50-day moving average, suggesting that short-term momentum is weakening. However, the longer-term trend remains intact as the price stays comfortably above the 200-day moving average, which continues to slope upward.
Moving Averages
The 50-day moving average has acted as a dynamic level of support and resistance throughout this chart. While the stock has recently dipped slightly below this average, it previously found support around this level multiple times. If the price remains under the 50-day moving average for too long, it could indicate a potential shift in short-term momentum.
Meanwhile, the 200-day moving average is rising consistently, a sign of longer-term strength. The price remains above this critical level, which generally indicates that the stock is still in an overall uptrend despite short-term pullbacks.
Volume and Buying Interest
Volume spikes are notable at key moments. There was a significant surge in volume in late December, likely indicating institutional buying or a major catalyst. Following that, volume has tapered off but remains healthy.
A closer look at recent volume bars shows an increase in red bars, which suggests some selling pressure has crept into the stock. While there’s no immediate sign of a breakdown, a further drop on high volume could indicate a deeper correction.
Relative Strength Index (RSI)
The RSI indicator is trending downward from higher levels, reflecting cooling momentum. Earlier in the chart, RSI reached overbought territory, signaling strong bullish sentiment. However, the indicator has since moderated and is approaching more neutral levels.
If RSI continues to slide lower, it could indicate further downside ahead. Conversely, if it finds support near the 40-50 range and bounces back, it could be a sign that buyers are stepping in to defend the current price range.
Analyst Ratings
Financial Institutions, Inc. (FISI) has recently garnered attention from analysts, leading to a mix of upgrades and downgrades that reflect varying perspectives on the company’s future performance.
Upgrades:
- Keefe, Bruyette & Woods: On February 3, 2025, this firm upgraded FISI from “Market Perform” to “Outperform,” raising the price target from $29 to $34. This decision was based on an assessment of the company’s improved financial metrics and growth prospects.
Downgrades:
- Piper Sandler: On March 25, 2024, Piper Sandler downgraded FISI from “Overweight” to “Neutral,” adjusting the price target from $23 to $19. This action was taken due to concerns over valuation and potential market headwinds.
The consensus among analysts is a “Moderate Buy” rating, with an average price target of approximately $33.33, suggesting a potential upside from current levels.
These mixed evaluations highlight the varying perspectives on FISI’s performance and future prospects, reflecting both confidence in its growth potential and caution regarding market challenges.
Earnings Report Summary
Financial Institutions, Inc. (FISI), the parent company of Five Star Bank, just released its latest earnings report, and let’s just say, it was a bit of a mixed bag. The company posted a net loss of $65.7 million for the fourth quarter, which comes out to $4.02 per share. The biggest reason? A major balance sheet restructuring. FISI decided to sell off some investment securities, which led to a $100.2 million pre-tax loss. While that stings in the short term, management believes it was a necessary move to set the company up for stronger earnings in the future.
For the full year 2024, the company ended with a net loss of $26 million, or $1.66 per diluted share. But not all of the numbers were bad. Net interest income in the fourth quarter actually increased to $41.6 million, showing some resilience despite the tough environment. On the lending side, total loans climbed to $4.48 billion, with commercial loans growing at a solid 4.5 percent for the year. That’s a good sign that businesses are still borrowing, but the downside is that total deposits slipped, mainly because of some seasonal outflows and a reduction in brokered deposits.
One of the biggest moves the company made was a $115 million equity offering in December, which helped raise $108.5 million in net proceeds. That cash injection significantly strengthened FISI’s capital position, improving its Common Equity Tier 1 ratio by 145 basis points over the previous year. That’s a fancy way of saying the company has a stronger financial cushion now, which should help support future growth and make investors feel a bit more comfortable.
Looking ahead, management is optimistic that these strategic decisions—despite the near-term pain—will set the company up for better days ahead. The focus now is on careful, credit-disciplined loan growth and maintaining strong asset quality. With a healthier balance sheet and improved capital reserves, the company is in a much better position to navigate economic uncertainties.
So, while the numbers might not look great at first glance, FISI is clearly making some big moves to strengthen its foundation. The real test will be whether these strategies start paying off in 2025 and beyond.
Financial Health and Stability
FISI’s financials present a mixed picture, with some strengths but also some areas that require careful attention.
Positives:
✔️ The company operates with a strong operating margin of 162.09%, indicating efficiency in its banking operations.
✔️ The book value per share of $28.33 is higher than the stock price of $26.93, suggesting the stock could be undervalued.
Concerns:
⚠️ A net loss of $25.98 million raises concerns about long-term profitability.
⚠️ The company carries $223.84 million in total debt, which could become problematic if interest rates remain high.
⚠️ Return on equity is negative (-4.71%), meaning the company is currently not generating value for shareholders.
While the book value comparison suggests the stock could be undervalued, it’s important to weigh that against the company’s financial performance. Negative net income is a red flag, especially for a bank, since consistent earnings are necessary to sustain dividends over time.
Valuation and Stock Performance
FISI trades at a relatively attractive valuation when compared to its historical averages and industry peers.
🔹 Price-to-Earnings (P/E) Ratio: 8.36 (trailing), which is low and suggests the stock is trading cheaply relative to earnings.
🔹 Price-to-Book (P/B) Ratio: 0.95, meaning the stock is trading slightly below its book value, a potential sign of undervaluation.
Looking at price movement, the stock has traded between $16.29 and $29.79 over the past year. It currently sits at $26.93, near the higher end of that range. The 50-day moving average is $27.43, while the 200-day moving average is $24.59, showing that the stock has been trending upward in recent months.
Another key factor is volatility. With a beta of 0.89, FISI is slightly less volatile than the overall market, which can be appealing for investors who prioritize stability in their dividend portfolios.
Risks and Considerations
While the dividend looks solid today, investors should be aware of some important risks.
1️⃣ Profitability is a concern, with the company posting a net loss in recent financial reports. Continued losses could pressure future dividend payments.
2️⃣ As a regional bank, FISI is exposed to local economic conditions. If businesses and consumers in its markets struggle, loan demand and credit quality could decline.
3️⃣ Debt levels are high at $223.84 million. If borrowing costs increase, profitability could be further squeezed.
4️⃣ Dividend growth has been slow, and with recent financial struggles, it’s unclear whether FISI can sustain meaningful increases in the future.
For long-term dividend investors, financial health matters just as much as the current yield. If the company cannot return to consistent profitability, it could impact dividend growth or stability down the road.
Final Thoughts
Financial Institutions, Inc. offers a compelling dividend yield of 4.60% and maintains a manageable payout ratio, making it an interesting choice for income-focused investors. The stock is also trading near book value, which could indicate it is undervalued.
However, the company’s recent net loss and high debt levels introduce some risks that cannot be ignored. While the dividend seems safe for now, its long-term sustainability will depend on whether FISI can return to steady profitability. Investors considering this stock should keep a close eye on upcoming earnings reports to see if the company can turn things around.
For those willing to take on a bit of risk in exchange for a strong yield, FISI might be worth a look. But as with any income stock, keeping an eye on financial health is key to ensuring that dividends continue flowing in the years ahead.
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