Cadence Bank’s 5.50% Perpetual Preferred: A Yield Play with Regulatory Strings Attached

Cadence Bank (NYSE: CADE) has ignited investor interest with its recent declaration of a CAD 0.3438 dividend per share on its 5.50% Series A Non-Cumulative Perpetual Preferred Stock, a move that underscores its financial stability while highlighting the complexities of preferred equity. The dividend, aligned with the coupon rate, reflects a consistent payout to preferred shareholders, but the instrument’s terms—particularly its non-cumulative structure and regulatory dependencies—paint a nuanced picture for income-focused investors.

The Dividend Structure: Yield vs. Risk

The Series A preferred shares, with a par value of just $0.01 per share, offer a 5.50% annual dividend, translating to a $0.00055 dividend per share quarterly—a figure that seems minuscule until scaled by the total number of shares outstanding. The bank’s quarterly financial disclosures reveal consistent preferred dividends of $2.372 million (as of March 31, 2025), suggesting robust liquidity to meet obligations. However, the non-cumulative feature of these shares is critical: should Cadence Bank elect to suspend dividends—due to regulatory constraints or capital needs—investors forfeit missed payments entirely.

This contrasts sharply with cumulative preferred stock, where unpaid dividends accumulate. For income investors, the allure of the 5.50% yield must be weighed against the risk that regulatory or economic headwinds could disrupt payouts.

Regulatory and Capital Considerations

Cadence Bank’s CET1 ratio of 12.4% as of March 2025 exceeds regulatory minimums, signaling a strong capital position. However, the bank’s ability to pay preferred dividends hinges on maintaining this ratio amid evolving regulations. The Federal Reserve’s heightened scrutiny of banks’ dividend policies post-2008 crisis means Cadence must balance shareholder returns with capital preservation.

The research highlights that Cadence’s preferred stock is explicitly mentioned in risk disclosures, emphasizing that dividend sustainability depends on “changes in legal or regulatory requirements” and “operational risks.” For instance, a sudden drop in CET1 below regulatory thresholds could force dividend cuts.

Market Context: Perpetual Preferreds in a Volatile Landscape

Perpetual preferred stocks, with no maturity date, are popular with investors seeking steady income. Yet their appeal wanes in environments where regulators tighten capital rules. Cadence’s shares trade in a market where regional banks face pressure to bolster reserves amid macroeconomic uncertainty.

Comparatively, peers like AmSouth Bancorp (ASO) or Synovus Financial (SNV) offer similar perpetual preferreds, but Cadence’s 5.50% coupon—60 basis points higher than the 10-year Treasury yield—could attract yield seekers. However, its non-cumulative structure remains a red flag for conservative investors.

Conclusion: A High-Yield Gamble, but for Whom?

Cadence Bank’s 5.50% perpetual preferred stock presents a compelling yield opportunity, particularly in a low-rate environment. With a consistent quarterly dividend track record and a CET1 ratio comfortably above regulatory benchmarks, the shares appear stable for now.

However, the non-cumulative feature and regulatory dependency introduce material risks. Investors must ask: Is the extra yield worth the possibility of abrupt dividend cuts? For aggressive income investors willing to monitor Cadence’s capital metrics closely, the answer may be yes. For others, the risks—particularly in a tightening regulatory climate—could outweigh the rewards.

Ultimately, Cadence’s preferred shares are a high-octane yield play for those with a tolerance for regulatory risk. Their perpetual nature offers no escape clause, so investors must stay vigilant. In a market where safety and yield are increasingly at odds, Cadence’s instrument is neither entirely one nor the other—a reality investors must accept to profit.