Popular, Inc. Boosts Income Investors with Attractive Dividends on Preferred Stock and Trust Securities

Popular, Inc. (NASDAQ: BPOP), a major financial institution in Puerto Rico and the U.S. Virgin Islands, recently announced its latest dividend distributions for its 6.375% Non-Cumulative Monthly Income Preferred Stock, 2003 Series A and 6.125% Cumulative Monthly Income Trust Preferred Securities, offering investors compelling income opportunities. These monthly payouts, set to be distributed in June 2025, highlight the company’s commitment to capital returns while underscoring key risks tied to its hybrid capital structure.

Dividend Details: Stability Amid Structural Nuances

The June 2025 dividend for the 2003 Series A Preferred Stock totals $0.132813 per share, representing a 6.375% annualized yield. This non-cumulative security, which became redeemable at Popular’s discretion starting March 2008, pays monthly to shareholders of record as of May 15, 2025, with payment set for June 2, 2025. Meanwhile, the Trust Preferred Securities (issued via Popular Capital Trust II) will distribute $0.127604 per security on the same date, backed by a 6.125% annualized yield. Both instruments are structured to align with Popular’s capital management strategy, though their terms diverge critically:

• Non-Cumulative vs. Cumulative: The preferred stock’s non-cumulative feature means missed dividends are not recoverable, whereas the Trust Securities’ cumulative nature obligates Popular to pay missed distributions eventually. This distinction is vital for income-focused investors assessing risk tolerance.
• Liquidity and Redemption: The preferred stock has no maturity date but can be redeemed at par value ($25 per share) at Popular’s option. The Trust Securities, tied to a subordinated debt structure, allow deferral of payments for up to 20 consecutive quarters (5 years) before triggering an event of default.

While dividends are stable, investors should monitor BPOP’s equity performance. A volatile stock price could impact the overall return on preferred or common holdings, especially if the company faces regulatory or economic pressures.

Why Popular, Inc. Matters to Income Investors

As Puerto Rico’s largest bank by assets ($66.4 billion as of 2025), Popular, Inc. benefits from a regionally dominant position and a diversified footprint across the Caribbean and U.S. mainland. Its common stock yields 2.82% (vs. 6.375% for preferred), reflecting lower risk but smaller payouts. The preferred and Trust Securities, however, offer premium yields with hybrid features straddling debt and equity:

• Capital Structure Advantages: Trust Preferred Securities qualify as Tier 1 capital under regulatory rules, bolstering Popular’s capital ratios. This allows the bank to maintain lending capacity while rewarding investors with steady income.
• Tax Considerations: Interest on Trust Securities is tax-deductible for Popular, enhancing its profitability. However, holders may face alternative minimum tax (AMT) implications, depending on their jurisdiction.

Risks and Considerations

• Redemption Risk: Popular could call its preferred stock at any time, potentially forcing investors to reinvest proceeds in lower-yielding alternatives.
• Economic Sensitivity: Puerto Rico’s economic recovery and U.S. monetary policy shifts (e.g., Fed rate hikes) directly impact Popular’s net interest margin, a key profit driver.
• Cumulative vs. Non-Cumulative Trade-off: While the Trust Securities’ cumulative feature offers downside protection, their subordination to general debt means holders rank lower in liquidation scenarios.

Conclusion: A High-Yield Play for Patient Investors

Popular, Inc.’s preferred and Trust Securities provide attractive yields (6.375%-6.125%) in a low-rate environment, making them appealing for income portfolios. However, investors must weigh structural risks, including non-cumulative terms and redemption flexibility.

With BPOPO offering over twice the yield of BPOP, the preferred stock suits aggressive income seekers willing to accept higher risk. Meanwhile, the Trust Securities’ cumulative feature and regulatory stability may attract conservative investors.

Final Take: For those comfortable with the nuances of hybrid capital instruments, Popular’s June 2025 distributions present a viable income stream. Yet, close monitoring of Puerto Rico’s economic trajectory and Popular’s regulatory standing is essential. These securities are best held as long-term holdings, with yields far exceeding Treasury bills or certificates of deposit, but requiring patience to navigate potential call or deferral scenarios.