Arrow Financial (NASDAQ: AROW) Chairman Buys Share – An Indication of Greater Things to Come

When people in charge of a company take on more position in the stock of the company, there are two possibilities. First, it could be that they can see the company making strides in a positive direction. Second, it could be that the company’s stock is rather undervalued, or both. Whatever their reason is, one sure thing is that they expect to make money.

Perhaps this is the reason Thomas L. Hoy, chairman of Arrow Financial (NASDAQ: AROW) bought $199500 worth of share on January 25, 2013. This sum of money was enough to get him 5000 shares. Was it shrewd of Mr. Hoy to buy 5000 shares? Read on to find an answer to this question.

On January 22, 2013, Arrow Financial released its annual operating results for the three- and twelvemonth periods ended December 31, 2012. The fourth quarter records net income of $5.5 million, which shows a 2.17% increase from net income for the fourth quarter of the preceding year. Its diluted earnings per share also showed an increase of 2.22% when compared to the same quarter of the preceding year.

Digging into Arrow Financial achieves, one would find out that an increase of this sort has been the order for the past four years. Its income of $22.2 million for the twelve-month period ended December 31, 2012 is the highest so far. Arrow Financial also noted that 2012 marks the fifth consecutive year of increased earning. With the company expanding its insurance agency operations, it is likely that 2013 will witness an increase in a similar fashion or even greater.

One other thing that investors check before buying shares is the performance of the company on basis of dividend. Arrow financial currently pays an annualized dividend of $1 per share, which is spread evenly over the four quarters in a year. Its annualized dividend yield is in the range of 4.00% and 4.20%. Arrow financial has already announced dividend of $0.25/share for first quarter of this fiscal year, which will be paid on March 15, 2013 to shareholders of record on March 1, 2013, showing the company’s continuous commitment in returning capital to investors.

The last time Arrow Financial issued a dividend increase was in the third quarter of 2008. Before this time, quarterly dividend payout was $0.24/share. Since then, Arrow Financial has been paying a quarterly dividend of $0.25/share. While the increase looks small, Arrow Financial has credibility for consistently paying dividend to investors.  At least, a shareholder can be sure of certain amount, quarterly.

How Does The Dividend Of Arrow Financial Competitors Look Like?

By merely looking at the figures of Arrow Financial, it may be difficult to assess the performance of Arrow Financials on basis of annual dividend. Therefore, I decided to show you the performance of two of its direct competitors, NBT Bancorp Inc (NASDAQ: NBTB), and Community Bank System Inc. (NYSE: CBU). These two companies have Market Cap of $696.14M, and $1.13B respectively. They currently pay an annualized dividend of $0.80/ share and $1.80/share respectively. Their annualized dividend yield is at about 3.80% and 3.70% respectively.

These figures show that, on basis of annual dividend, Arrow financial is in a strong position. Many investors do not look in the way of Arrow Financial probably because it’s a Small-Cap stock. However, if comparison were made with the Large-Cap stocks of the banking industry, one would find out that Small-Cap stocks like Arrow Financial are worth the money. This is probably what Mr. Hoy gathered before deciding to invest his hard-earned money on Arrow Financials.