Why TriCo Bancshares (TCBK) Is a Dividend Rock in a Volatile Economy

In an era of economic uncertainty, investors crave stability—particularly in dividend-paying stocks. TriCo Bancshares (NASDAQ: TCBK), the parent company of Tri Counties Bank, has emerged as a beacon of consistency, offering a compelling blend of dividend reliability and financial resilience. With a 15-year streak of uninterrupted dividend growth and a payout ratio well within sustainable limits, TCBK stands out as a top choice for income-focused investors. Let's dissect its strengths and why now might be the time to act.

Dividend Sustainability: A 15-Year Track Record of Growth

TriCo Bancshares has been a dividend stalwart since 2010, with its latest quarterly payout of $0.33 per share marking its 139th consecutive dividend increase. This discipline is underpinned by a conservative payout ratio of 38.48%, which leaves ample room for growth. At a yield of 3.36%, TCBK's dividends outpace the financial sector's average of 1.42%, offering superior income potential.

The company's recent May 22, 2025, dividend declaration—payable in June—reinforces its commitment to shareholders. With earnings per share (EPS) of $0.80 in Q1 2025, the dividend remains comfortably covered, even as net income dipped slightly from the prior quarter. This flexibility is critical in volatile markets, where many banks are pressured to cut payouts.

Financial Resilience: Navigating Challenges with Strength

TriCo's Q1 2025 results highlight its ability to weather headwinds:
- Loan Growth: Total loans rose by $52.3 million (3.1% annualized) to $6.8 billion, driven by demand in commercial and consumer lending.
- Deposit Surge: Deposits increased by $117.8 million (5.8% annualized), bolstering liquidity and reducing reliance on costlier funding.
- Capital Cushion: Shareholders' equity grew by $34.6 million, lifting book value per share to $38.17, a 3% increase year-over-year.

While net interest margin dipped to 3.73% (down 3 basis points), this reflects broader industry trends as rates stabilize. Importantly, non-performing loans (NPLs) rose to $54.9 million, but the allowance for credit losses (ACL) remains robust at 234% of NPLs, signaling prudent risk management. Management's proactive reserves for criticized credits and unfunded commitments underscore preparedness for economic shocks.

Growth Catalysts: Community Ties and Strategic Focus

Beyond financials, TriCo's community-focused strategy strengthens its local relevance. Initiatives like the Community Cares Basic Needs Drive and $110,000 in scholarships in 2024 foster goodwill and customer loyalty. These efforts, part of its 50th-anniversary milestones, align with its $10 billion asset base, ensuring stable deposit growth in core markets.

The bank's merger with Valley Republic Bancorp in 2022 also expanded its footprint, enhancing economies of scale. With $1.29 billion market cap and a low valuation relative to peers, TCBK offers upside potential as economic clarity emerges.

Analyst Perspective: A "Hold" Rating Masks Value

While analysts rate TCBK a “Hold” with a $53 price target, the stock's $45.50 current price suggests it's undervalued. TipRanks' Spark AI notes “neutral” sentiment, citing robust revenue growth and no leverage risk—key positives in a volatile environment. Bearish momentum indicators are offset by the dividend's allure and the bank's strong liquidity ($6.8 billion in deposits vs. $5.6 billion in loans).

Why Act Now?

• Defensive Dividend: A 3.36% yield with a fortress-like payout ratio shields investors from market swings.
• Balance Sheet Strength: Capital ratios remain healthy, and NPL coverage is industry-leading.
• Undiscovered Value: At 5.6x trailing P/B, TCBK trades at a discount to peers, offering margin of safety.

Conclusion: A Dividend Champion for Any Portfolio

TriCo Bancshares isn't just surviving—it's thriving. Its blend of dividend discipline, asset growth, and risk management positions it to outperform in both calm and stormy markets. With a track record unmatched in its peer group and a valuation that ignores its strengths, TCBK is a rare find for income investors.

The time to act is now. Secure your position in this banking stalwart before its story gains wider recognition.