Orange County Bancorp’s Dividend Delusion: A Safe Yield or a Risky Gamble?

Investors are often torn between two compelling narratives: the allure of steady dividends and the ominous signals of insider selling. At Orange County Bancorp (NASDAQ: OBT), this tension is now front and center. The bank’s $0.13-per-share dividend—set to be paid in June—offers a 1.8% yield, but the recent exodus of shares by top executives raises a critical question: Is this dividend a testament to financial strength, or a mirage masking governance concerns? Here’s why investors must look beyond the dividend yield to assess the risks.

A Dividend That’s Hard to Dismiss… But Easy to Question

Orange County Bancorp has maintained a consistent dividend schedule, paying out $0.49 per share over the past year, with a slight uptick to $0.13 in its most recent announcement. The dividend’s predictability has likely drawn income-seeking investors, especially as yields on safer assets like Treasuries remain low. The bank’s 125-year history and $2.5 billion in assets also provide a veneer of stability.

Yet, beneath the surface, there’s reason to pause. The dividend payout ratio—dividends divided by net income—could strain if earnings falter. While OBT’s dividend is modest, the bank’s reliance on consistent profitability to sustain it is non-negotiable. A single quarter of weak results could force a cut, undermining the dividend’s credibility.

The Insider Sell-Off: A Red Flag or a Coincidence?

Here’s where things get dicey. Over the past six months, eight insider sales have occurred, with zero purchases. Top executives, including the CFO (Michael Coulter) and Chief Credit Officer (Stephen Rooney), sold significant stakes:

• Michael J. Coulter (EVP and CLO): Sold 2,497 shares ($65,346)
• Gregory Sousa (EVP and Deputy CLO): Executed five sales totaling 2,440 shares ($60,057)

While insiders might sell for personal reasons, the lack of any buying activity by executives is a glaring asymmetry. This isn’t a one-off: sales by regional presidents and other senior leaders have been steady since late 2024.

The data above shows a disconnect: OBT’s stock price has drifted sideways over the past two years, even as dividends were maintained. That’s a warning sign. Typically, consistent dividends should correlate with rising stock prices if investors believe the payout is sustainable. Here, the dividend is a floor, not a catalyst.

Institutional Investors Are Also Split

Insiders aren’t the only ones with mixed signals. Institutional investors have taken opposing stances in Q1 2025:

• Hudson Valley Investment Advisors (a subsidiary of OBT) boosted holdings by 95.8%, signaling confidence.
• Ameriprise Financial, however, cut its stake by 57.7%, suggesting caution.

This divergence hints at a lack of consensus. The parent company’s aggressive buying might reflect strategic alignment, but outsiders are voting with their feet.

The Bottom Line: Dividends vs. Governance

The $0.13 dividend is a lifeline for income investors, but it’s also a distraction from deeper questions:

1. Why are executives selling? Personal finance? Regulatory limits? Or a lack of confidence in OBT’s long-term trajectory?
2. Is the dividend sustainable? A payout ratio above 50% could put pressure on capital buffers if profits slip.
3. What’s the governance culture? The absence of insider purchases amid sales raises concerns about transparency.

The Investment Decision: Proceed with Caution

The dividend’s 1.8% yield isn’t enough to justify ignoring red flags. Here’s how to proceed:

• Demand transparency: Scrutinize SEC filings (Forms 4) for the timing and reasons behind insider sales.
• Watch the payout ratio: If earnings weaken, the dividend could become unsustainable.
• Compare to peers: Banks like Zions Bancorp (ZION) or KeyCorp (KEY) offer higher yields with clearer governance signals.

In conclusion, OBT’s dividend is a double-edged sword. It attracts income investors but clouds critical governance questions. For now, the yield isn’t high enough to compensate for the risk of an earnings stumble or a dividend cut. Investors should tread carefully—this is a stock to own only if you’re fully confident in its leadership’s ability to deliver consistent profits, not just consistent dividends.

Final verdict: Hold for now. Wait for clarity on insider motives and earnings trends before diving in.