Dividend Growth Stock Overview: UMB Financial Corporation

Photo: Flickr.com/Paul Sableman

About UMB Financial Corporation

UMB Financial Corporation is a bank and financial holding company headquartered in Kansas City, MO. Through its subsidiaries, UMB Financial provides banking services, institutional investment management and payment solutions to customers throughout the United States. The company started as City Center Bank in 1919 and was renamed several times as it expanded, finally becoming a United Missouri Bancshares, a multi-bank holding company, in 1971. UMB Financial employs nearly 3,600 people.

The company’s primary business is its banking business, under the name UMB Bank. UMB Bank has 105 locations across Arizona, Colorado, Illinois, Kansas, Nebraska, Oklahoma, and Texas. UMB Financial also has non-bank businesses, specifically Scout Investments, an institutional asset-management company that runs proprietary mutual funds; UMB Fund Services, which provides accounting, transfer agency and other services to the asset management industry; and a payment solutions business under UMB Bank that provides institutional cash management and credit/debit card services, including healthcare and flexible spending account card services.

In 2014, UMB Financial posted earnings per share (EPS) were $2.65, down 17.2% from 2013. Total income was $120.7 million, divided as follows: the Banking business generated 44% of the company’s income, the Institutional Investment Management business generated 24%, the Payment Solutions business generated 21%, and the Asset Servicing business generated the remaining 11%. Total bank deposits increased 6.4% to $12.7 billion, shareholder’s equity was up 9.1% to $1.6 billion and UMB Financial’s book value was up 8.4% to $36.10. Despite the increase in deposits, UMB Financial’s income decreased because of lower interest rate spreads from the low-interest rate environment. (The net interest spread on loans decreased to 2.43% from 2.49% in 2013, which itself was also a drop from 2012’s figure of 2.65%.)

With EPS of $2.65 and the current annualized dividend of 98 cents, UMB Financial has a current payout ratio of 37%.

The company also has a current share repurchase program. In April 2015, UMB Financial initiated a 2 million share repurchase program, which is a follow-on to similar repurchase programs (all for 2 million shares) in 2011, 2012, 2013 and 2014. Of the 2 million shares authorized for repurchase in 2014, less than 51,000 shares were actually repurchased. In contrast, UMB Financial raised $231 million in 2013 by issuing 4.5 million shares. In addition, UMB Financial issued 3.4 million additional shares in conjunction with the $1.3 billion acquisition of Marquette Financial Companies, a privately held financial services company with bank branches in Arizona and Texas.

The company is a member of the S&P Small Cap 600 and Russell 2000 indices and trades under the ticker symbol UMBF.

UMB Financial’s Dividend and Stock Split History

UMB Financial Dividend Growth

Since 2008, UMB Financial has increased its annual dividend by 4 cents a year.

UMB Financial has increased dividends since 1994. The company traditionally announces dividend increases at the end of October, with the stock going ex-dividend in December. In October 2015, UMB Financial announced a 4.3% increase to an annualized rate of 98 cents a share. I expect UMB Financial to announce its 23rd straight year of dividend growth in October 2016.

Since 2008, UMB Financial has increased its quarterly dividend by a penny a share each year. Before that, from 2006 – 2008, the company grew dividends year-over-year by more than 10%. UMB Financial’s 5-year and 10-year dividend growth rate is 4.8% and 7.6%, respectively. Longer term, UMB Financial has compounded dividends at an average rate of 6.2% since 1995.

UMB Financial has split its stock once since beginning its 22-year record of dividend growth. In May 2006, the company split its stock 2-for-1. In addition, UMB has rewarded investors with multiple stock dividends: the company gave 10% stock dividends to investors in December 1991, June 1994, December 1995 and December 1999; and 5% stock dividends to investors in December 1996, December 1997 and December 2001. For every share of UMB stock purchased before December 1991, you would now have 3.39 shares.

Over the 5 years ending on December 31, 2014, UMB Financial Corporation stock appreciated at an annualized rate of 9.53%, from a split-adjusted $35.60 to $56.12. This underperformed the 13.0% compounded return of the S&P 500 index, the 15.9% compounded return of the S&P Small Cap 600 index, and the 14.0% compounded return of the Russell 2000 Small Cap index over the same period.

UMB Financial’s Direct Purchase and Dividend Reinvestment Plans

UMB Financial Corporation has both direct purchase and dividend reinvestment plans. You must already be an investor in UMB Financial to participate in the plans; if you own the stock in your brokerage account, you’ll have to have them transferred into your name in order to join the plans. The minimum investment for additional direct purchases is $50, and the dividend reinvestment plan allows for full or partial reinvestment of dividends.

The plans’ fees structures are favorable for investors – the company pays all fees associated with share purchases, whether through optional purchases or dividend reinvestment. When you sell your shares, you’ll pay a transaction fee of either $15 or $25 (depending on the type of sell order) plus a commission of 12 cents per share. All fees will be deducted from the sales proceeds.

Helpful Links

UMB Financial’s Investor Relations Website

Current quote and financial summary for UMB Financial (finviz.com)

Information on the direct purchase and dividend reinvestment plans for UMB Financial

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