Popular, Inc. Holds Steady with $0.70 Dividend Amid Resilient Q1 Performance

Popular, Inc. (NYSE: BAM), Puerto Rico’s largest financial institution, has reaffirmed its commitment to shareholders by maintaining its quarterly dividend at $0.70 per share, payable on July 1, 2025, to holders of record as of May 29, 2025. This decision underscores the company’s financial resilience amid a challenging economic environment, supported by robust first-quarter results and strategic capital management.

A Strong Foundation: Q1 Financial Highlights

Popular’s Q1 2025 performance demonstrated stability and growth across key metrics:

1. Net Income and Earnings:
2. Net income remained flat at $177.5 million, consistent with Q4 2024, reflecting operational discipline.

3. Earnings per share (EPS) rose to $2.56, up from $2.51 in the prior quarter, driven by improved net interest margins.

4. Net Interest Margin (NIM) Expansion:

5. NIM increased to 3.40% (+5 basis points), with taxable equivalent NIM hitting 3.73% due to higher reinvestment yields on U.S. Treasury securities and lower deposit costs.

6. Deposit costs fell by 13 basis points, aided by strategic repricing of Puerto Rico public deposits and Popular Bank’s (PB) online accounts.

7. Deposit Growth and Strategic Shifts:

8. Total deposits rose by $934.9 million (+1.4%) to $65.8 billion, fueled by a $763.5 million increase in NOW/money market accounts and $159.2 million growth in Puerto Rico public deposits.

9. Popular’s shift toward interest-bearing deposits targeting affluent clients highlights a strategic focus on customer retention and margin optimization.

10. Loan Portfolio and Credit Quality:

11. Loans held-in-portfolio increased by $146.4 million to $37.3 billion, with Popular Bank’s commercial and construction lending offsetting declines in Puerto Rico’s commercial loans.
12. Non-performing loans (NPLs) fell to $314.1 million (0.84% of total loans), while net charge-offs (NCOs) dropped by $18.3 million to $49.1 million. The allowance for credit losses (ACL) rose to $762.1 million, ensuring a robust 242.7% coverage ratio for NPLs.

Capital Strength and Share Repurchases

Popular’s capital position remains a cornerstone of its dividend sustainability:
- Common Equity Tier 1 (CET1) ratio strengthened to 16.11%, well above regulatory requirements.
- Tangible book value per share increased by $3.86 to $72.02, reflecting strong equity growth.

The company also continued its share repurchase program, buying 1.27 million shares in Q1 for $122.3 million, bringing total repurchases under the $500 million authorization to $339.6 million. This signals confidence in BAM’s valuation and reinforces its focus on shareholder returns.

Risks and Challenges

Despite its strong performance, Popular faces headwinds:
- Economic Uncertainty: Management increased ACL reserves by $16.1 million due to heightened pessimism about the economic outlook, reflecting cautious risk management.
- Non-Interest Income Headwinds: A $12.6 million decline in non-interest income, driven by the sale of its car rental business and lower investment management fees, highlights reliance on core banking operations.
- Leadership Transition: CEO Ignacio Alvarez’s departure on June 30, 2025, introduces uncertainty, though successor Javier Bañuelos inherits a financially sound platform.

Dividend Sustainability: Data-Driven Confidence

The $0.70 quarterly dividend (annualized $2.80) is supported by:
1. Stable Earnings: Q1 EPS of $2.56 leaves ample room for dividend coverage, with a payout ratio of 74% (well below the 90% threshold analysts consider risky).
2. Capital Flexibility: A 16.11% CET1 ratio and $2.1 billion in liquidity (post-April bond issuance) provide a buffer against shocks.
3. Strategic Capital Allocation: Share repurchases and ACL builds demonstrate discipline in balancing growth with risk management.

Conclusion

Popular, Inc.’s decision to maintain its $0.70 dividend reflects its financial resilience and strategic foresight. With a 3.2% dividend yield (based on a recent stock price of $87.00), BAM offers income investors stability in a volatile market. Key metrics—improved NIMs, robust capital ratios, and strong deposit growth—bolster confidence in its ability to sustain payouts.

However, shareholders should monitor risks such as non-interest income declines and macroeconomic volatility. For now, Popular’s Q1 results and capital strength justify its dividend policy. As Javier Bañuelos takes the helm, the company’s focus on technology-driven efficiency and diversified revenue streams could further enhance shareholder value, making BAM a compelling play in the regional banking sector.