Bank OZK preferred shares yield 7.2%, a 720-bp spread over Treasuries. The analyst behind this coverage argues CRE loan fears are overblown, citing the bank's credit track record.
Alpha Score of 49 reflects weak overall profile with strong momentum, poor value, moderate quality. Based on 3 of 4 signals – score is capped at 90 until remaining data ingests.
Bank OZK (NASDAQ:OZK) preferred shares yield 7.2%, a level that suggests the market is pricing in above-average risk from the lender's commercial real estate portfolio. The analyst behind this coverage argues those fears are exaggerated.
Some construction and land-development loans need added attention. The bank's credit team has a track record of working through problem credits without taking outsized losses, the analyst said. The preferred shares trade at a discount to their $25 par value, pushing the current yield above the rate on similar bank preferreds from better-known regional lenders.
A buyer collecting that dividend gets paid 720 basis points over risk-free Treasuries. The trade-off: if CRE losses do spike materially, Bank OZK could suspend the preferred dividend before touching common equity. The common stock already reflects that worry – shares trade below book value with a price-to-tangible-book ratio around 0.9x.
The analyst holds a long position in both OZK and its preferred series and has written out-of-the-money put options on the common. No compensation was received for this article beyond standard Seeking Alpha contributor terms.
No schedule for the next earnings report has been set. OZK typically reports quarterly results in mid-April.
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