Bank OZK (OZK), previously Bank of the Ozarks, is a $4 billion market cap regional bank that was founded in 1903 and is headquartered in Little Rock, Arkansas, notes Ben Reynolds, editor of Sure Retirement.
With the recent negative news around banking, you might not be particularly enthused by a security like Bank OZK, which is being featured in the Sure Retirement Top 10 for the second straight month. However, we find that it is useful to take a step back and think about the long term.
Bank OZK’s share price is down ~18% this year, but the security has been a fine investment over the years. Here’s a look at what an initial $10,000 investment would be worth today had you invested at the beginning of the following years:
2013 = $19,000
2010 = $44,000
2005 = $38,000
2001 = $394,000
2000 = $266,000
To be sure, there were better and worse periods to invest throughout this time frame. We put in both 2000 and 2001 just to illustrate this concept. In order to see your $10,000 investment turn into over a quarter of a million dollars in the last 23 years you would have had to put up with plenty of bad news and share price gyrations. There have been all sorts of reasons to worry, but for those that held on, good things happened.
Furthermore, this doesn’t just apply to the total returns that were generated. Bank OZK has increased its dividend for 27 consecutive years, meaning that your dividend payment would have grown every single year during these periods. More impressive is the fact that Bank OZK has increased its per-share dividend every single quarter since 2010.
This doesn’t mean things will work out this time. However, it is much easier to ride out the ups and downs when you 1) have an idea of what is possible over long holding periods and 2) see a rising stream of income being deposited into your account every quarter.
Bank OZK is trading at just 6.0 times our expected earnings-per-share of $5.40 for the year. This compares very favorably to our target price-to-earnings ratio of 11. Reverting to our target valuation by 2028 would add 12.8% to annual returns over this period.
In total, Bank OZK is forecasted to return 18.9% per year for the next five years, stemming from 3% earnings growth, a starting yield of 4.3%, and a low double-digit contribution from multiple expansion.