Valley National Bancorp: Steady Dividends and Preferred Value in a Rising Rate World

In an era of economic turbulence and volatile markets, investors crave stability—both in income and capital preservation. Valley National Bancorp (NASDAQ: VLY), the largest bank in New Jersey with $62 billion in assets, offers precisely that. Its common stock boasts a decades-long dividend track record, while its newly issued preferred shares (Series C, VLYPN) provide a compelling risk-reward profile in a rising interest rate environment. Let’s dissect why both securities deserve a place in your portfolio.

The Common Stock: A Dividend Dynamo with Hidden Resilience

Valley National Bancorp’s common stock has paid uninterrupted quarterly dividends since 1984—a staggering 40-year streak. While the dividend growth rate has slowed (-2.90% annually over the past decade), the payout remains robust. As of May 2025, the trailing 12-month yield is 4.39%, far outpacing the 10-year Treasury yield and offering a safe harbor for income seekers.

Critically, Valley’s dividend payout ratio of 38% (vs. earnings) leaves ample room for flexibility. Even if earnings dip—say, due to loan loss provisions or margin pressure—the bank can sustain payouts without risking dividend cuts. This contrasts sharply with peers like First Republic Bank, which collapsed in 2023 after aggressive growth strained its capital.

The Preferred Shares: A Rising Rate Play with Built-In Safeguards

Valley’s Series C preferred stock (VLYPN) is a standout in today’s rate-sensitive market. The security offers a fixed 8.25% yield until September 2029, then resets to a floating rate tied to the five-year Treasury yield + 4.18%. This structure ensures investors benefit from both current high yields and future rate alignment.

The recent market price of $26.28 (a 5.12% premium to its $25 liquidation value) reflects investor confidence in Valley’s capital strength. Unlike the older Series B preferred (VLYPO), which faced price dips during rate hikes, VLYPN’s longer fixed-rate period and Treasury-linked reset reduce near-term volatility.

Why Now? The Perfect Storm for Both Securities

1. Banking Sector Recovery: After the 2023 regional bank crisis, institutions with strong capital ratios (like Valley’s 11.2% Tier 1 Common Ratio) are rebounding. Valley’s focus on commercial & industrial loans and owner-occupied commercial real estate—less risky than office CRE—bolsters its balance sheet.
2. Preferred Market Appetite: Investors are fleeing low-yielding bonds for preferred stocks. Valley’s Series C offers a tax-advantaged 8.25% yield, superior to Treasury notes and competitive with high-yield corporate bonds (which carry greater default risk).
3. Rate Cycle Dynamics: With the Fed’s rate hikes likely peaking, the fixed-rate period of VLYPN insulates investors from further near-term rises. Post-2029, the Treasury-linked reset ensures the yield stays competitive as rates stabilize or decline.

Risks and Mitigations

• Non-Cumulative Dividends: Unlike some preferred stocks, missed payments on VLYPN won’t accrue. However, Valley’s consistent common dividend history and solid profitability (5 out of 10 on profitability rank, but with positive net income for a decade) reduce this risk.
• CRE Exposure: While Valley’s CRE portfolio is less concentrated than peers, a prolonged real estate downturn could strain margins. Diversification into C&I loans mitigates this.

The Bottom Line: Buy Both for Income and Growth

Valley National Bancorp’s common stock is a dividend stalwart, offering 4.39% yield with a fortress balance sheet. The Series C preferred, meanwhile, is a tactical bet on rising rates—offering 8.25% until 2029 and a hedge against future rate uncertainty.

For income-focused investors: Allocate 5–10% of your portfolio to VLY common stock for steady dividends and capital appreciation.

For yield-hungry investors: Purchase VLYPN now, before its fixed-rate period ends and yields reset higher. With a 5% premium to par, there’s limited downside given Valley’s financial strength.

In a world of economic uncertainty, Valley National Bancorp offers a rare combination of safety and opportunity. Act now—before the market catches on.