I have set up an account with TD Ameritrade for the purpose of holding this portfolio of stocks. My entry into a new position will be $1,000. Of course, this amount is perfectly scalable so long as one builds evenly. After a few weeks we want to have an equally weighted portfolio of 10 or 11 stocks. In case you couldn’t guess from the title of this post, the first Dividend King for this portfolio will be Farmers & Merchants Bancorp [FMCB].
Farmers & Merchants Bancorp [FMCB]
Here is the Profile from TD Ameritrade:
Farmers & Merchants Bancorp is the bank holding company for Farmers & Merchants Bank of Central California (the Bank). The Company offers a range of deposit instruments, including checking, savings, money market, time certificates of deposit, individual retirement accounts and online banking services for both business and personal accounts. It provides lending products, such as commercial, commercial real estate, real estate construction, agribusiness, consumer, credit card, residential real estate loans, and equipment leases. Its commercial products include term loans, leases, lines of credit and other working capital financing and letters of credit. Its financing products for individuals include automobile financing, lines of credit, residential real estate, home improvement and home equity lines of credit. It offers services, such as account reconciliation, on-line account access, and electronic funds transfers by way of domestic and international wire, and automated clearinghouses.
Unfortunately, we just missed their last dividend payment and they’re the only Dividend King who does not pay a quarterly dividend, preferring instead to make their dividend payments semiannually. At the time of their last dividend declaration, Kent A. Steinwert, Chairman, President and CEO, noted, “The Board is pleased with the Company’s record first quarter 2022 and record full-year 2021 financial results and unanimously approved the cash dividend. This year marks the 87th consecutive year that Farmers & Merchants Bancorp has paid cash dividends and the 57th consecutive year we have increased dividends. As a result of the reliability of our cash dividends over many decades, we remain a member of a select group of only 44 publicly traded companies designated as “Dividend Kings” by Sure Dividend where Farmers & Merchants Bancorp is ranked 17.”
You gotta love when the CEO is proud of their dividend history and even references being a Dividend King in their own press release!
The Details
Data as of 2022-07-16
| Name | Farmers & Merchants Bancorp |
| Ticker | FMCB |
| Website | Investor Relations |
| Sector | Financials |
| Dividend Streak | 57 years |
| Last Price | $923.90 |
| Div Amt (semiannual) | $7.85 |
| Ann Dividend | $15.70 |
| Last Ann Div Inc | 4.3% |
| Dividend Yield | 1.7% |
| Payout Ratio (ttm) | 18.5% |
| Beta (5-yr monthly) | 0.27 |
| P/E Ratio (ttm) | 10.93 |
| Margin of Safety | 16.9% |
FMCB has the highest price per share of all the Dividend Kings and $1,000 will only purchase one share. At 1.7% it has one of the lowest yields of all the Dividend Kings and yet it is still higher than the yield of the S&P 500. However, the trailing 12-month dividend Payout Ratio (dividends as a percentage of earnings) is extremely low; offering plenty of safety and plenty of room to grow the dividend. I believe FMCB is undervalued right now. Their historical P/E Ratio over the last decade has been closer to 14 and reversion to the mean is likely. Further, FMCB has held its value rather well since the market started heading south 7 months ago. This suggests that when the market and economy do improve, FMCB will continue to outperform.
I have set up a limit order this evening to purchase FMCB for no more than $925.00. Hopefully, it will execute at market open on Monday. I’ve chosen a limit order in this particular case because FMCB is trading over the counter (OTC) and is not as liquid as most of the Dividend Kings. The limit order ensures a purchase price that is just a hair above where it closed on Friday. If the order doesn’t process, I will revisit it the following day. For most stocks that an investor plans to purchase and hold forever, a market order is perfectly sufficient.