High-yield stocks pay out dividends that are significantly more than market average dividends. The S&P 500’s current yield is only ~1.2%, so “high-yield” has taken on a new meaning from what it may have been historically.

High-yield stocks can be very helpful to shore up income after retirement. A $120,000 investment in stocks with an average dividend yield of 5% creates an average of $500 a month in dividends.

We have created a spreadsheet of stocks (and closely related REITs and MLPs, etc.) with dividend yields of 5% or more…

(You can download your free full list of all high dividend stocks with 5%+ yields (along with important financial metrics such as dividend yield and payout ratio) by clicking here.)

What's next on our list of high dividend stocks to review is Bank of Marin Bancorp (BMRC).

The bank has a very impressive 17-year dividend increase streak, much higher than most of its financial services competitors.

Bank of Marin has been able to sustain this dividend increase streak through strong credit quality and prudent risk exposure, both of which drive sustainable earnings over time.

Business Overview

Bank of Marin Bancorp is the holding company for Bank of Marin, which is a small community bank based in Novato, California.

The company was founded in 1989 and currently employs just over 300 people, meaning it is quite small in the world of banks.

Like other banks, Bank of Marin provides basic checking and savings products, retirement accounts, certificates of deposits, business services, as well as various types of real estate and business loans.
 

Source: Investor presentation

The company’s total assets have grown to nearly $4 billion today, and it staffs 34 office locations in Northern California.

Bank of Marin’s first quarter earnings showed a decline in earnings from $9.4 million a year ago to just $2.9 million. The prior quarter saw earnings of just $0.61 million, so it was a strong improvement sequentially.

Bank of Marin focused on eliminating expensive sources of debt, as well as higher-yielding lending opportunities to help improve its net interest margin, which has suffered of late due to higher deposit costs.

Total loans ended the period slightly lower sequentially, falling from $2.07 billion to $2.06 billion. Net interest margin was essentially flat, falling three basis points to 2.50%.

We see $1.10 in earnings-per-share for this year after the Q1 report showed some weakness.

Growth Prospects

Bank of Marin’s growth history is quite spotty, as it has boosted earnings at times, and seen earnings decline significantly at other points.

Since 2014, earnings have averaged a 3.1% decline, and we see earnings for this year as the worst in over a decade, should our estimate come to fruition.
 

Source: Investor presentation
 

We see loan growth and net interest income as the only potential sources of earnings growth going forward, with much of that depending upon its ability to lend at high rates.

As we can see, average loan yields have been rising steadily since the bottom in 2020, but loan growth has been modest at about 3%.

It will be critical for the bank’s earnings growth to see this number continue to rise, particularly as it relates to deposit costs.

We don’t see credit quality as a headwind given the bank’s history of maintaining a strong capital base, and high lending standards.

In all, we see 3% projected annual earnings-per-share growth from 2024 levels.

Competitive Advantages & Recession Performance

As is common in banking, Bank of Marin has no real competitive advantages. The business of banking only has so many products, and each entrant offers virtually exactly the same slate of services, meaning consumers have plenty of choice.

Bank of Marin attempts to compete on location and serving parts of the community where larger banks may not find the value, but the fact remains that banks struggle to find sustainable advantages, and Bank of Marin is no exception.

Interestingly, Bank of Marin saw quite stable earnings during the Great Recession, which is certainly not something one could say about most banks.

This is due to its strong credit quality, which sees Bank of Marin outperform when other banks that are less prudent with lending tend to struggle.

The company performed quite well all things considered during the previous major economic downturn, the Great Recession of 2008-2009:

• 2008 earnings-per-share: $1.13
• 2009 earnings-per-share: $1.37
• 2010 earnings-per-share: $1.28

The bank was able to essentially maintain its level of earnings during a terrible recession that saw a lot of banks post sizable losses. We see this as a strong characteristic of Bank of Marin.

When the next recession strikes, we’d continue to expect outperformance against the bulk of Bank of Marin’s peers.

Dividend Analysis

Bank of Marin’s current dividend is $1.00 per share annually, which is just under its projected level of earnings for this year. That puts payout growth in some doubt, and indeed, the bank has paid the same dividend for eight consecutive quarters.

Still, given the disappointing share price performance, the yield is quite strong at 4.9% on the current ~$15 share price. That is about four times the yield of the S&P 500, currently.

With a projected payout ratio of 87% for this year, we believe Bank of Marin needs to see earnings growth soon, or its dividend may be called into question.

We see modest growth in the dividend to $1.22 per share in five years’ time, but that is dependent upon the bank’s earnings improving in the years to come.

Final Thoughts

While Bank of Marin has boosted its dividend for 17 consecutive years, we do see some cause for concern looking ahead. The bank has an extremely strong yield at nearly 5%, but with earnings still on the decline, we are cautious.

We see modest earnings growth from 2024’s very low levels, as we think the bank’s focus on high-yield lending is likely to help with margins and therefore, earnings.

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