Popular, Inc. (BPOP): A Dividend-Driven Buy Opportunity Amid Strategic Capital Allocation and Strong Earnings Momentum

In the ever-evolving banking sector, investors are often on the lookout for companies that balance disciplined capital management with sustainable growth. Popular, Inc. (NASDAQ: BPOP) has emerged as a standout candidate in 2025, combining a recent dividend hike, robust earnings, and strategic capital return programs with a commanding position in Puerto Rico and the U.S. mainland. For income-focused investors and those seeking long-term value creation, BPOP presents a compelling case.

Dividend Hike and Capital Return: A Vote of Confidence

On July 16, 2025, Popular, Inc. announced a 7% increase in its quarterly common stock dividend, raising the payout from $0.70 to $0.75 per share, effective in the fourth quarter of 2025. This move, subject to board approval, signals the company's confidence in its capital position and commitment to rewarding shareholders. The dividend increase follows a $500 million common stock repurchase program announced in July 2025, in addition to the remaining $32.8 million under its 2024 repurchase program. These actions underscore Popular's ability to generate consistent cash flow while maintaining a strong balance sheet.

The dividend yield, currently around 3.5%, becomes even more attractive when considering the company's 15.91% Common Equity Tier 1 (CET1) ratio as of June 30, 2025. This high capital buffer provides a safety net for continued shareholder returns, even in a low-growth environment. For context, the average CET1 ratio for regional banks is typically below 12%, making Popular's capital position a key differentiator.

Q2 2025 Earnings: Momentum in Net Interest Income and Credit Quality

Popular's second-quarter 2025 results, released on July 23, 2025, reinforced its financial strength. The company reported net income of $210.4 million, up from $177.5 million in Q1 2025, with earnings per share (EPS) rising to $3.09 from $2.56. This growth was driven by a $25.9 million increase in net interest income (NII) to $631.5 million, with the net interest margin (NIM) expanding to 3.49% (3.85% on a taxable equivalent basis).

The Banco Popular de Puerto Rico (BPPR) segment, which accounts for 71% of total assets, saw NII rise to $538.5 million, with its NIM increasing to 3.68%. Meanwhile, the Popular Bank (PB) segment, operating on the U.S. mainland, reported NII of $102.2 million, with its NIM surging 19 basis points to 2.93%. This outperformance was fueled by lower deposit costs and growth in commercial and construction loans.

Credit quality also improved, with non-performing loans (NPLs) declining by $2.4 million and the NPL-to-loan ratio dropping to 0.82%. Net charge-offs (NCOs) fell by $6.9 million, and the allowance for credit losses (ACL) to loans ratio of 2.02% reflects prudent risk management. These metrics suggest Popular is well-positioned to navigate potential macroeconomic headwinds.

Strategic Leadership in Puerto Rico and the U.S.

Popular's dominance in Puerto Rico is a cornerstone of its competitive advantage. The company holds 31% of the total deposit portfolio in the territory, with $20.9 billion in public deposits as of June 30, 2025. This low-cost funding source provides a stable base for lending and capital generation. Additionally, Puerto Rico's economic tailwinds—5.4% unemployment, a 40% minimum wage increase over four years, and $45 billion in federal reconstruction funds—create a fertile environment for growth.

On the U.S. mainland, Popular is leveraging its expertise in community association lending (Florida), healthcare lending (Northeast), and construction/multifamily lending (New York). These niche verticals allow the company to capitalize on regulatory-driven demand (e.g., engineering assessments for high-rise buildings in Florida) and demographic trends (e.g., affordable housing needs).

Capital Allocation and Long-Term Value Creation

Popular's capital return strategy is equally impressive. In Q2 2025, the company repurchased 1.1 million shares for $112 million, with a total of $234.2 million spent on buybacks in the first half of 2025. The new $500 million repurchase program, combined with the dividend hike, reflects a disciplined approach to capital deployment.

The company's Return on Tangible Common Equity (ROTCE) target of 12% by Q4 2025 (with a long-term goal of 14%) further underscores its focus on shareholder value. With net charge-offs expected to remain stable at 70–90 basis points in 2025, Popular's risk-adjusted returns appear attractive.

Investment Thesis: A Buy for Income and Growth

Popular, Inc. offers a rare combination of dividend growth, earnings momentum, and strategic capital allocation. Its leadership in Puerto Rico, a market with structural advantages, and its expansion into high-growth U.S. verticals position it to outperform peers. The recent dividend hike and repurchase program add to its appeal, particularly for investors seeking income with downside protection.

However, risks remain, including regulatory scrutiny of Puerto Rico-focused banks and potential interest rate volatility. That said, Popular's strong CET1 ratio and diversified capital return initiatives mitigate these concerns.

For investors, the key takeaway is clear: Popular, Inc. is a dividend-driven buy opportunity with a compelling balance sheet, improving credit metrics, and a strategic vision aligned with long-term value creation. As the company executes on its capital return programs and leverages Puerto Rico's economic momentum, BPOP could deliver both income and capital appreciation in the years ahead.