Medallion Bank's Series G Preferred Stock: A High-Yield Dividend Play with Strategic Capital Strength

When it comes to income-generating assets, the market has been starved for options that deliver both safety and sizeable returns. Enter Medallion Bank's Series G Preferred Stock (MBNKO), a security that checks both boxes with a 10.69% dividend yield and a capital strategy that's as disciplined as it is bold. For investors seeking to diversify their portfolios with a high-conviction play, this stock deserves a closer look.

The Attraction of a 10.69% Yield

At first glance, the $0.80625 quarterly dividend—equivalent to $3.225 annually—might seem too good to be true. But for MBNKO, it's not just about the yield; it's about the context. With the stock trading at $25.40 per share, this preferred offering outperforms traditional fixed-income alternatives like corporate bonds and money market funds, which have been dragged down by rising interest rates. Even against the broader preferred stock market, MBNKO stands out.

But let's not get carried away by the numbers. The dividend is non-cumulative, meaning if the board skips a payout, you don't get it back. That's a red flag for some, but Medallion's recent track record offers reassurance. The bank just redeemed $46 million in Series F preferred shares, a move that boosted its Tier 1 leverage ratio to 19.3%, giving it ample room to service dividends without overextending.

Strategic Capital Allocation: Building a Resilient Engine

Medallion's 2025 capital strategy is a masterclass in financial engineering. By issuing 3.1 million shares of Series G Preferred Stock, the bank raised $77.5 million—funds it intends to deploy toward expanding its consumer loan portfolios in recreation and home improvement. These segments have proven resilient, with demand for big-ticket purchases like RVs and home renovations holding up even in a slowing economy.

The redemption of Series F shares further underscores this discipline. By eliminating $46 million in legacy obligations, the bank not only improved its leverage ratio but also freed up capital to reinvest in higher-margin activities. This is the kind of capital management that turns skeptics into believers.

A Reset Clause: Balancing Risk and Reward

One of the most intriguing aspects of Series G is its fixed-rate reset feature. Through June 30, 2030, the stock pays a 9.00% yield. After that, the rate resets to the five-year U.S. Treasury rate plus 4.94%. This structure offers a sweet spot: near-term stability for income seekers and long-term upside for those who believe the Fed will keep rates elevated.

Critics will argue the reset could hurt yields if the Treasury rate drops. But given the current inflationary backdrop and the Fed's cautious stance, that scenario seems unlikely for at least the next five years. For now, investors can lock in the 10.69% yield while the bank uses the proceeds to fuel growth.

The Bigger Picture: Diversification and Long-Term Value

MBNKO isn't just a dividend play—it's a strategic lever for the bank's long-term value creation. By strengthening its capital base, Medallion can maintain lending margins while navigating a competitive market. The redemption of Series F shares also signals to regulators and shareholders that management is serious about maintaining a robust balance sheet.

For investors, this means the stock could serve as a diversifier in a portfolio skewed toward equities or tech stocks. Its sensitivity to interest rates is lower than common shares, and its seniority in the capital structure makes it a safer bet during downturns.

Final Take: A High-Yield Buy with Caveats

If you're eyeing MBNKO, here's the bottom line: This is a high-conviction trade for income-focused investors who can stomach moderate volatility. The 10.69% yield is a siren song, but the non-cumulative dividend structure and the bank's exposure to consumer credit risk mean this isn't a “set it and forget it” holding.

For those who do pull the trigger, position sizing is key. Allocate this to a portion of your portfolio dedicated to high-yield alternatives, and pair it with lower-risk assets like Treasury securities or blue-chip equities. Medallion's capital strategy gives it the flexibility to weather storms, but no stock is immune to market-wide corrections.

In a world where safe, high-yield opportunities are scarce, Medallion Bank's Series G Preferred Stock is a rare gem. Just make sure you're buying it for the right reasons—and not just because the numbers look too good to pass up.