There is a lot to like in the technicals of Cadence Bancorporation (CADE) at present. The share price has been caught in a sustained decline for some time now. Buying volume though is well up this year. We can see this bullish volume trend in the On-Balance Volume indicator on the daily chart below. This indicator takes note of either the buying volume or selling volume for a given day. If it is positive, it adds this number to the overall total. If it is a minus number, it simply takes it away. The result is a key indicator which gives us a good read on positive and negative volume.
Strong Insider Buying
Furthermore the OBV line shows the bullish divergence continues to be in play which is an encouraging sign for the bulls. We have had sustained insider activity over the past 8 months. These purchases have been made from the COO and the CEO. Insiders are essentially the people in the know. At any given time, they may have plenty of reasons to sell. When they buy however, it invariably means that they believe the price is going to go up.
As technicians, we believe that the share-price inevitably will follow the volume trend. What we are seeing on the technical chart is merely the fact that decreasing selling pressure in the share-price is being demonstrated in how volume has been trending. Suffice it to say, we believe it should only be a matter of time before a significant bullish move transpires
Cadence pays out a $0.70 dividend which equates to a current 4.19% yield. Many times, the strength of the dividend is a good read on where earnings and consequently shares are headed in the near-term. The strength of the dividend is found in how its key financial metrics such as cash-flow and debt have been trending.
On the cash-flow statement, we can see that $80 million was paid from a free cash-flow kitty of $246 million over the past four quarters. This gives us a pay-out ratio of 32% which is attractive. The encouraging trend here is the sustained growth in free cash-flow over the past few years. Increasing cash-flow is going to facilitate growth in the dividend.
Balance Sheet Getting Stronger
Shareholder equity reached $2.47 billion in the latest quarter which means the firm is currently trading under book value. Cadence Bancorporation´s market cap come in at $2.11 billion at present. Growing net worth on the balance sheet positively affects the share price of the company over time. Retained earnings came in at $543 million in the third quarter. This line-item informs us on whether management has been reinvesting back into the business. Retained earnings is up 60% since December 2017 which is impressive given the dividend payment as well as the fact that the firm has bought back quite a bit of stock over the past 12 months or so.
Earnings per share came in at $1.72 last year and are expected to hit $1.89 this coming year. Rising earnings and rising book vale bode well for both the stock and dividend going forward. Even from an earnings standpoint, the current dividend pay-out of $0.70 per share is also well covered by forward expectations of $1.72 per share.
To sum up, shares of Cadence Bancorporation (CADE) are currently trading with a forward earnings multiple of 8.8. The firm´s assets, sales and cash-flow also are selling at attractive multiples. Furthermore, with book value and earnings expected to rise, we believe there is a good opportunity for shares to start a sustained rally here. Let´s see if the recent bullish volume trend in Cadence Bancorporation can finally move the share-price northward.