Zions Bancorporation’s Dividend Strategy: A Steady Income Play for Investors
62min read Zions Bancorporation (NASDAQ: ZION) has reaffirmed its commitment to shareholder returns with its latest dividend declarations for both common and preferred stock. The moves underscore the Utah-based bank’s financial resilience, offering investors a mix of steady income and flexibility through its dividend structures. Here’s a deep dive into what the announcements mean for investors.
Common Stock: A High-Yield Anchor
The company declared a $0.43 quarterly dividend on its common stock, maintaining an attractive 5.59% yield based on recent stock prices. This marks the 54th consecutive year of dividend payments and the 12th year of annual increases—a strong indicator of management’s confidence in its financial footing.
With total assets of $89 billion and $3.1 billion in annual revenue (as of 2024), Zions operates across 11 western U.S. states, focusing on small/middle-market banking and public finance advisory services. The dividend’s consistency aligns with its inclusion in the S&P MidCap 400 and NASDAQ Financial 100 indices, which reward firms with reliable cash flows.
Investors seeking income should note that Zions’ yield outpaces the average for regional banks, making it a standout option in a low-yield environment. However, the stock’s performance remains tied to macroeconomic factors like interest rate trends and regional economic health.
Preferred Stock: A Floating-Rate Play with a Safety Net
For income seekers willing to navigate a bit more complexity, Zions’ Series A perpetual preferred stock (ZIONP) offers an intriguing opportunity. The dividend rate is set quarterly as the higher of (1) 0.52% above the three-month SOFR (Secured Overnight Financing Rate) or (2) a 4.00% floor, reflecting the post-LIBOR era’s transition to SOFR-based benchmarks.
The next dividend, payable on June 16, 2025, to shareholders of record as of June 1, is calculated using the SOFR rate observed around the payment date. While the exact rate isn’t known until then, the 4% floor ensures investors won’t earn less than that, even if SOFR dips. This structure balances income potential with downside protection—a rare combination in floating-rate instruments.
Key Considerations for Investors
- Common Stock: Ideal for investors prioritizing stability and dividend growth. The 12-year streak of increases suggests Zions is prioritizing returns while maintaining capital buffers.
- Preferred Stock: Attracts those seeking higher yields (historically 6.59% based on a $1.51 annual dividend) but willing to accept variability tied to SOFR. The non-cumulative feature means missed payments aren’t owed, so investors must monitor Zions’ financial health closely.
- Regulatory and Economic Risks: Zions’ regional focus makes it vulnerable to economic downturns in western states. Additionally, the bank’s exposure to commercial real estate and small-business lending could face headwinds if interest rates remain elevated.
Conclusion: A Balanced Income Portfolio Play
Zions Bancorporation’s dividend strategy offers something for every income investor. The common stock’s 5.59% yield and proven dividend growth make it a solid core holding, while the Series A preferred stock (ZIONP) provides a tactical opportunity for those comfortable with floating rates.
Crunching the numbers:
- Common Stock: At a recent price of ~$42, the $0.43 dividend equates to $1.72 annually, supporting the 5.59% yield.
- Preferred Stock: With a $25 depositary share price (representing 1/40th of a $1,000 preferred share), the $1.51 annual dividend per preferred share translates to 6.04% yield for holders of depositary shares—a compelling premium over Treasuries.
Both instruments benefit from Zions’ strong capital ratios and diversified revenue streams. However, investors should pair this analysis with broader portfolio considerations, such as interest rate exposure and geographic risk. For now, Zions’ dividends remain a testament to its enduring financial discipline—a rare virtue in an uncertain banking landscape.
