Huntington Bancshares' HBANM: A Steady Income Play in a Volatile Rate Environment

The recent dividend declaration for Huntington Bancshares' Series I preferred stock (NASDAQ: HBANM) underscores the resilience of this income vehicle in an uncertain rate landscape. With a fixed 5.70% yield in a market where preferred securities are trading near 5.5%-6%, HBANM offers investors a compelling balance of stability and returns—provided they are prepared to navigate the risks inherent in non-cumulative, perpetual structures.

A Dividend Anchor in a Rising Rate World

Huntington's June 27 announcement of a $0.35625 per depositary share dividend—payable September 2—maintains its commitment to shareholders despite lingering uncertainty over Federal Reserve policy. The bank's capital strength is a key pillar of this reliability: with a dividend payout ratio of 0.56 (meaning 56% of earnings fund dividends), its earnings are sufficiently robust to weather potential economic shocks. This contrasts with peers whose payout ratios flirt with unsustainability, particularly in regions facing credit quality pressures.

The non-cumulative nature of HBANM is a double-edged sword. While it means missed dividends are not owed to shareholders—a risk in stressed environments—the stock's perpetual structure also means payouts can continue indefinitely, a feature increasingly attractive as Treasury yields lag behind preferred securities.

Yield vs. Risk: HBANM vs. the Broader Market

HBANM's 5.70% yield sits squarely within the preferred sector's June 2025 range, which averaged 5.5%-6%, according to the ICE BofA Fixed Rate Preferred Securities Index. However, its appeal lies in its issuer-specific strengths:
- Capital Buffer: Huntington's $210 billion asset base and fortress-like liquidity (highlighted in its Q4 2024 report) underpin dividend sustainability.
- Rate Resilience: Unlike floating-rate preferreds, HBANM's fixed rate insulates income from near-term rate hikes—though prolonged increases could pressure its price.
- Competitive Position: As a regional banking leader with 968 branches across 13 states, Huntington's franchise value supports its ability to retain depositors and manage net interest margins.

In contrast, 10-year Treasury yields languished below 4% in June, offering little income allure. Investors seeking yield must accept some risk—but HBANM's blend of stability and payout makes it a safer bet than high-yield corporate bonds or emerging market debt.

Risks and Monitoring Metrics

While HBANM is no free lunch, its risks are manageable for informed investors:
1. Non-Cumulative Structure: If Huntington skips a dividend—unlikely unless under severe stress—shareholders have no recourse. Monitor its regulatory capital ratios (e.g., CET1 above 10%) and loan loss provisions.
2. Rate Sensitivity: As rates rise further, preferred stock prices may dip. Track the Fed's dot plot and Huntington's net interest margin trends.
3. Earnings Momentum: A slowdown in loan growth or fee income could strain dividends. Follow quarterly EPS and return on equity (ROE) metrics.

Investment Thesis: A Place for HBANM in Defensive Portfolios

For income-focused investors willing to accept non-cumulative risk, HBANM offers a disciplined entry point. Its yield compares favorably to broader preferred indices, while its issuer's balance sheet reduces default fears. Pair it with short-duration Treasuries or inverse rate ETFs to hedge against rate volatility.

Actionable Advice:
- Buy: If yields on 10-year Treasuries fall below 3.5%, signaling a Fed pivot to rate cuts.
- Hold: For investors prioritizing income over capital appreciation, given its stable payout history.
- Avoid: If Huntington's CET1 ratio drops below 9% or net interest margins compress by >20% year-over-year.

Conclusion

In an era where safe yield is scarce, Huntington's HBANM stands out as a pragmatic choice. While not without risks, its dividend reliability and issuer strength make it a viable alternative to overvalued bonds and volatile stocks. For portfolios needing ballast in a rising rate world, HBANM's 5.70% yield—and the bank's regional dominance—deserve serious consideration.

Disclosure: The analysis is for informational purposes only. Always consult a financial advisor before making investment decisions.