Dividend Yield: 5.9%
Market Cap: $980 million
Park National Corp. (AMEX:PRK) is a small banking company focused in the Midwest. One of my first jobs after college was at the newspaper down the street from Park National’s headquarters in Newark, Ohio, and I can tell you firsthand this bank is a point of great hometown pride.
Unfortunately, it hasn’t been without troubles in the wake of the financial crisis. PRK had to restate earnings for its full-year 2011 report, and recently created a wholly owned subsidiary to deal with its glut of bank-owned properties. Furthermore, in October, PRK’s net income dropped almost 13% year-over-year, with its community banking division seeing a nearly 10% decline. Even more disturbing is that through Q3 it was 22% behind 2011 numbers.
However, there are signs of life lately. The restated earnings for 2011 actually came in better than expected, the company’s big dividend remains sustainable at a roughly 70% payout ratio, and if you believe that housing has hit bottom, then Park National will continue to improve its balance sheet. If you doubt the improvement, just bring up a list of insider transactions — 10 PRK directors have added to their personal stake since Oct. 21.
If you’re looking for a turnaround bank stock with big upside potential, Park National is worth a look. The huge dividend is a big hedge even if shares move sideways for a bit.