ConnectOne Bancorp (CNOB): Riding Momentum and Dividends to Outperformance

In a market where investors often face a binary choice between chasing growth or seeking steady income, ConnectOne Bancorp (CNOB) emerges as a rare dual threat. With a 39% year-to-date return through June 2025—far outpacing the S&P 500's 13% gain—this regional bank has demonstrated short-term momentum while offering a 3.11% dividend yield with robust growth. For investors balancing aggressive price appreciation and income generation, CNOB's dual appeal is compelling. Let's dissect why this stock deserves a closer look.

Momentum Machine: Outperforming the Market

CNOB's recent performance has been nothing short of impressive. Over the past year, the stock has surged +39%, significantly outperforming both its peers and the broader market. This momentum is backed by strong fundamentals and strategic moves, including its pending merger with The First of Long Island Corporation, which could boost its branch network and deposit base.

Analysts have taken note, with a “Buy” consensus and a 12-month price target of $28.50—a 14% upside from its June 2025 price of $25.00. The Zacks Rank (if applicable) or momentum score (A/B) likely reflects this positive sentiment, though the company's consistent earnings growth and low payout ratio (38%) also signal durability.

Dividend Dynamo: A Steady Income Stream

While momentum traders focus on CNOB's price action, income investors are drawn to its 3.11% dividend yield—well above the industry average (2.78%) and the S&P 500's 1.57%. Even more compelling is the 18.45% average annual dividend growth over five years, driven by disciplined financial management and a fortress-like balance sheet.

The company's payout ratio of just 38% leaves ample room for future hikes, especially as earnings are expected to grow 37.36% in 2025. This combination of a healthy dividend yield and growth potential makes CNOB a standout in a low-yield world.

Earnings and Catalysts: Fueling the Dual Strategy

Underpinning CNOB's momentum and dividends is a solid earnings story. In Q4 2024, net income rose 20.5% quarter-over-quarter to $18.9 million, driven by a 2.86% net interest margin—up 19 basis points from the prior quarter. The bank's focus on small-to-midsize businesses and its fintech subsidiary, BoeFly, provides a steady pipeline of loans and fee-based revenue.

The merger with First of Long Island, expected to close in Q2 2025, adds another catalyst. This deal will expand CNOB's footprint in New York and New Jersey, boosting deposit growth and cross-selling opportunities.

Risks to Consider

No investment is without risks. Rising interest rates could pressure margins if deposit costs rise faster than loan yields. Additionally, merger integration risks and economic slowdowns could dampen earnings. However, CNOB's strong capital ratios (Tier 1 leverage ratio of 10.7% as of Q4 2024) and diversified client base mitigate these concerns.

Investment Thesis: Buy for Momentum and Income

CNOB checks all the boxes for investors seeking a dual strategy:
- Momentum: Outperformance in a volatile market, driven by earnings growth and strategic moves.
- Dividends: A growing yield in a low-rate environment, with ample room for hikes.
- Catalysts: The pending merger and organic growth in key markets.

At its June 2025 price of $25.00, CNOB trades at a 1.2x price-to-book ratio, below its five-year average of 1.3x. With a $28.50 price target and a 3.11% yield, the stock offers asymmetric upside for both traders and income-focused investors.

Action to Take: Buy CNOB at current levels. Set a stop-loss at $22.00 to protect gains, and target $28.50 for a 14% profit. For income investors, the dividend alone provides a $0.18/quarter payout, with growth potential.

In a market hungry for winners, ConnectOne Bancorp isn't just a stock—it's a strategy. Whether you're chasing momentum or building an income portfolio, CNOB delivers on both fronts.