HarborOne Bancorp Boosts Dividend: A Smart Move for Income Investors?

In the ever-changing landscape of the financial markets, dividend increases from established companies often serve as a beacon of stability and growth. harborone bancorp (NASDAQ: HONE) has recently announced a 12.5% increase in its quarterly cash dividend, raising it from $0.08 to $0.09 per share. This move, effective from April 23, 2025, for shareholders of record as of April 9, 2025, translates to an annualized dividend rate of $0.36 per common share. But what does this mean for income-focused investors, and is it a smart move in the current economic climate?



The Significance of the Dividend Increase

HarborOne Bancorp's decision to boost its dividend is more than just a number on a financial statement. It's a signal of confidence from the company's management and a testament to its financial health. President and CEO Joseph F. Casey emphasized that the increase is supported by the company's current and projected earnings, indicating that the bank believes this payout level is sustainable without compromising growth initiatives or capital requirements.

For income-focused investors, this is a significant development. At the current share price of $10.63, the new dividend translates to an annualized yield of approximately 3.4%. This yield is particularly attractive in an environment where interest rates and other investment returns may be volatile. The dividend increase provides tangible value to investors seeking stable income, potentially driving up demand for the stock and increasing its share price.

Regulatory Approval and Financial Health

One of the most noteworthy aspects of this dividend increase is the implicit regulatory approval it requires. Banks must navigate a complex regulatory landscape, and the fact that harborone has received approval to boost shareholder returns suggests strong fundamental performance. This is especially important in an environment where banks face pressure from interest rate fluctuations and potential credit quality concerns.

HarborOne's financial performance in 2024 further supports this optimism. The company reported a full-year net income of $27.4 million, a 70.5% increase from 2023's $16.1 million. The fourth quarter of 2024 saw a 126.5% increase in net income to $8.9 million, demonstrating strong execution and operational resilience. The bank's deposit strategy shows promise, with a 6.1% annualized core deposit growth and improved deposit costs, down 6 basis points. The 74% FDIC-insured deposit ratio provides stability, though it's below ideal levels for regional banks.

Potential Challenges and Risks

While the dividend increase is a positive signal, it's not without its challenges. The rise in criticized and classified commercial loans to $178.6 million from $134.3 million quarter-over-quarter signals potential stress in the commercial real estate portfolio. The increase in nonperforming assets to 0.51% of total assets, while manageable, reflects broader commercial real estate market pressures. The mortgage segment's return to profitability ($1.1 million) is positive, but the $30.7 million decrease in the rate-locked pipeline suggests potential headwinds. The bank's capital management through share repurchases (394,457 shares at $12.64) demonstrates confidence, though the declining tangible common equity ratio (from 9.17% to 9.05%) requires attention.



Conclusion: A Balanced Approach

In conclusion, HarborOne Bancorp's 12.5% dividend increase reflects a balanced approach to capital allocation, demonstrating prudent management while still prioritizing shareholder returns. For income-focused investors, this move provides tangible value and signals management's positive outlook on the bank's financial trajectory in an uncertain economic environment. However, it's essential to consider the potential risks and challenges the bank may face in the coming quarters.

As always, it's crucial to do your own research and consider your investment goals and risk tolerance before making any decisions. HarborOne Bancorp's dividend increase is a positive development, but it's just one piece of the puzzle in the ever-changing landscape of the financial markets. Stay informed, stay vigilant, and happy investing!