Since my primary investment objective deals with the generation of income via higher-yielding plays, dividend-related events are always something I tend to keep an eye on. With that said, and in the wake of its latest dividend increase, I wanted to highlight several reasons why I've chosen to stay bullish on shares of Chemical Financial Corporation (NASDAQ:CHFC).
Headquartered in Midland, Michigan, Chemical Financial Corporation operates as the financial holding company of Chemical Bank that offers banking and fiduciary products and services to residents and business customers in Michigan. Its products and services include business and personal checking accounts, savings and individual retirement accounts, time deposit instruments, electronically accessed banking products, residential and commercial real estate financing, commercial lending, consumer financing, debit cards, safe deposit box services, money transfer services, automated teller machines, access to insurance and investment products, corporate and personal wealth management services, and other banking services.
Recent Trend Behavior
On Tuesday, shares of CHFC, which currently possess a market cap of $932.02 million, a forward P/E ratio of 12.51, and a dividend yield of 3.37% ($0.96), settled at a price of $28.45/share. Based on a closing price of $28.45/share, shares of CHFC are trading 2.46% above their 20-day simple moving average, 1.19% above their 50-day simple moving average, and 3.21% below their 200-day simple moving average.
Although these numbers indicate a short-term uptrend and a long-term downtrend for the stock, which generally translates into a slight buying mode for most near-term traders and a selling mode for long-term investors, I strongly believe the company's trend behavior will improve over the next 6-12 months, especially since the company demonstrated a fairly strong quarter several weeks back and just recently announced a 4.3% increase in its quarterly dividend.
Recent Dividend Behavior
On Tuesday, August 19, Chemical Financial announced a quarterly dividend increase of $0.01/share, which brings its upcoming dividend payout to $0.24/share. It should be noted that the increase will be paid on September 19 for shareholders of record as of September 5. This boost represents a 4.3% increase from its prior dividend of $0.23/share, which was paid to investors on June 20.
Based on the company's dividend behavior over the last 24 months, it should come as no surprise that I foresee its next quarterly dividend hike taking place in September of 2015, and I expect that increase to be at least $0.01/share but no more than $0.03/share.
A Brief Look At Q2 Earnings
On Wednesday, July 23, Chemical Financial reported the results of what I believe to be a very strong second quarter. The company's Q2 EPS of $0.54/share surpassed Wall Street estimates by $0.05/share, while its revenue of $67.26 million beat Wall Street estimates by an impressive $1.34 million.
It should be noted that the company also demonstrated a 14.3% increase in its Q2 net income ($16.2 million during Q2 2014 vs. $14.2 million during Q2 2014), a 12.9% increase in total loans ($4.9 billion as of Q2 2014 vs. $4.34 billion as of Q2 2013), and lastly a 5.8% increase in total deposits ($5.09 billion as of Q2 2014 vs. $4.81 billion during Q2 2013).
For those of you who may be considering a position in Chemical Financial, I strongly recommend keeping a close eye on the company's recent dividend behavior, which has demonstrated a solid uptrend over the last two years, and its ability to demonstrate steady increases in both its net income and total loans, as each of these catalysts will play a role in the company's long-term growth.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.