Quick Read
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Bank OZK raises its dividend every quarter, now yielding 4.31% with only 32% of earnings paid out, leaving ample buffer against loan losses.
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Prosperity Bancshares raises dividends annually at a 37% payout, while Pinnacle Financial holds its ratio at just 11% to conserve capital for its Synovus merger.
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George Gleason cited nearly $10 billion in construction repayments, but rising special mention loans and a $22 million Seattle charge-off signal lingering credit risk.
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Bank OZK( NASDAQ:OZK ) declared a quarterly dividend of $0.49 per share on October 1, up from $0.48. This equals $1.96 a year and a forward yield of 4.31%. The raise came to about 2.1%. Small increases are the whole method here: OZK adds about a penny every quarter.
A Higher Check Every Quarter Since 2019
The dividend record shows a larger payment each quarter, rising from $0.22 in January 2019 to today's $0.49, a gain of about 123%. The increases continued through 2020, even if some were tiny, rising from $0.27 to $0.2725 to $0.275. The stock is up only 0.83% over the past year at $45.56, so most of the yield's rise comes from the growing payout.
Earnings Cover the Dividend Three Times Over
Trailing 12-month EPS is $6.06, and the forward dividend uses about 32% of it. That share is the payout ratio, meaning the piece of profit sent to shareholders. At about a third, the bank keeps most of its earnings to absorb losses. Second-quarter EPS of $1.49 beat the $1.46 estimate but came in below the $1.58 from a year earlier. Over the past six quarters, quarterly EPS has stayed between $1.44 and $1.59.
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Shares trade at 0.863 times book value of $54.47 per share and about 8 times trailing earnings. Chief Financial Officer Tim Hicks said OZK used about $175 million of a $200 million buyback authorization over four quarters, buying below tangible book value. OZK now has a new $200 million authorization in place.
Construction Lending Is the Real Test
OZK's Real Estate Specialties Group (RESG) makes large construction loans, the riskiest part of commercial real estate lending. On the July 22 call, Chairman and CEO George Gleason said RESG repayments came to almost $10 billion over four quarters.
"The RESG portfolio is recycling in a constructive and healthy and normal way."
Gleason said OZK is now below regulators' concentration guideline for total commercial real estate. He expects construction loans to drop under the 100% guideline by year-end or early next year. On credit, special mention loans rose. These loans are flagged for closer monitoring but have not yet been marked as problems. OZK also charged off $22 million on a Seattle office building.
"I think there'll be a few more bumps in the road and we'll have a few more problem assets."
Hicks said those losses had already been reserved for in advance: "I think we take a very cautious, prudent approach to building the ACL at the appropriate time." The ACL, or allowance for credit losses, is the buffer a bank sets aside for loans it expects to go bad.
How OZK Compares With Two Southern Rivals
Prosperity Bancshares( NYSE:PB ) pays $0.60 a quarter, about 37% of its second-quarter adjusted EPS of $1.62. It increases once a year. Cullen Zalman said the latest raise "reflects the continued confidence the Board has in our company and our markets." Prosperity is also absorbing the Stellar deal, which closed July 1, 2026. Pinnacle Financial Partners( NYSE:PNFP ) pays $0.24 a quarter against third-quarter 2025 EPS of $2.27, about 11%. That low payout keeps capital on hand for its Synovus merger.
Verdict for Income Investors
OZK's 4.31% yield looks durable. A payout near one-third, steady quarterly earnings and a shrinking construction book give the board room to keep adding pennies. Credit is the main risk. If office or life-science loans go bad faster than reserves expect, the increases could slow. Management expects the newer corporate lending unit to match RESG in size in 2027, which would make the loan book less concentrated. Income investors should track special mention loans and charge-offs every quarter.
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