Why Stellar Bancorp’s Dividend Growth and Texas Resilience Make It a Top Banking Pick

In a world where many banks are grappling with economic uncertainty, Stellar Bancorp (STLB) stands out as a beacon of stability. The Texas-based community bank has quietly built a reputation for reliable dividend growth and a focused regional strategy that positions it to thrive even as broader markets face headwinds. Let’s dissect what makes this stock a compelling buy now.

Dividend Growth: A Steady Hand in Volatile Times

Stellar Bancorp’s dividend track record is its strongest selling point. In late 2024, the bank increased its quarterly dividend by $0.01 to $0.14 per share—a move that underscores its financial confidence. With another $0.14 dividend slated for June 2025, investors can count on consistent payouts. Crucially, this dividend growth isn’t a one-off: since its 2023 merger of Allegiance Bancshares and CBTX, Stellar has prioritized shareholder returns while maintaining robust capital ratios.

The math is clear: at current prices, STLB offers a dividend yield of 4.2%, comfortably above the average for regional banks. This yield isn’t just attractive—it’s sustainable. Stellar’s strong Texas-centric loan portfolio and low credit losses provide the foundation to keep raising dividends.

Regional Resilience: Betting on Texas’ Unstoppable Momentum

Stellar Bancorp’s narrow geographic focus is its secret weapon. While national banks spread themselves thin, Stellar concentrates on small- to medium-sized businesses and households in Texas’ booming markets like Houston, Dallas, and Beaumont. The Lone Star State’s economy—driven by energy, tech, and logistics—is a growth machine. Unemployment in these regions hovers near 3%, and commercial real estate and small business lending remain red-hot.

Stellar’s 2025 Q1 earnings, despite a minor dip in net income to $24.7 million from $25.2 million in Q4 2024, still reflect solid execution. Management emphasized that the dip was a speed bump in its post-merger “foundation-building phase,” with growth initiatives now hitting their stride. Texas’ economic diversity—energy, healthcare, and tech—means Stellar isn’t betting on a single industry, reducing risk.

Capital Management: Aggressive Buybacks and Prudent Risk-Taking

Stellar isn’t just returning cash to shareholders—it’s doing so strategically. In 2024, the bank authorized a $60 million share repurchase program, followed by an expanded $65 million program in 2025. These buybacks aren’t arbitrary; they’re part of a plan to boost shareholder value while maintaining capital ratios above regulatory benchmarks.

The bank’s 2024 10-K filing (a must-read for investors) reveals a focus on disciplined risk management. Loan loss provisions remain low, and nonperforming assets are negligible. This prudence allows Stellar to grow without overextending—a stark contrast to banks that overleveraged during the pandemic boom.

Risks? Yes. But the Upside Outweighs Them

No investment is risk-free. Texas’ economy isn’t immune to a nationwide recession, and rising interest rates could pressure net interest margins. However, Stellar’s community banking model—personalized service for local clients—gives it an edge in retaining deposits and attracting loyal borrowers.

Moreover, its recent merger integration is complete, and synergy benefits are now fueling efficiency. The bank’s cost-to-income ratio improved to 52% in Q1 2025, signaling operational strength.

The Bottom Line: A Dividend Champion with Room to Grow

Stellar Bancorp offers a rare combination: a high yield, a fortress balance sheet, and a growth story tied to one of America’s strongest economies. With dividends set to keep rising and buybacks shrinking its share count, this is a stock primed to outperform as markets stabilize.

Investors seeking income and resilience should act now. Texas isn’t slowing down—and neither is STLB.

Disclosure: This article is for informational purposes only. Always conduct your own research or consult a financial advisor before making investment decisions.