Cullen/Frost Raises Quarterly Dividend 3.0% to $1.03

Cullen/Frost Bankers, Inc. raised its quarterly dividend 3.0% to $1.03 a share from $1.00. The higher rate carried ex-dividend dates of May 29, 2026, and August 31, 2026, and lifts the annual dividend to $4.12 a share.

Why the dividend changed

Cullen/Frost did not give a separate reason for the increase. The board announced it alongside first-quarter results showing stronger profit, wider net interest margin and growth in loans and deposits. Net income available to common shareholders rose to $169.3 million from $149.3 million a year earlier, while taxable-equivalent net interest income increased to $460.8 million from $436.4 million. Average loans grew 5.9% and average deposits grew 1.4%. Cullen/Frost’s first-quarter release identified no split, merger or spin-off behind the change.

The operating context remained supportive after the declaration. Second-quarter net income available to common shareholders reached $170.4 million, compared with $155.3 million a year earlier. Average loans increased 7.4%, average deposits increased 2.1%, and taxable-equivalent net interest income rose 4.3%. Chief Executive Phil Green described sustained, balanced growth and cited faster growth in both deposit categories and loans. The second-quarter results also showed a 13.95% common equity Tier 1 ratio and $90.0 million of share repurchases.

Organic expansion remains central to the strategy. Expansion branches accounted for 35.1% of loan growth and 23.1% of deposit growth from 2018 through the second quarter of 2026, according to Cullen/Frost’s investor presentation. Management expects the expansion program to provide a positive income stream beginning in 2026.

Dividend track record

The increase extends Cullen/Frost’s dividend-growth streak to 31 consecutive years. The recent sequence shows an annual reset rather than frequent small adjustments. The quarterly rate was $0.95 on the February 28, 2025 ex-dividend date, moved to $1.00 on May 30, 2025, stayed there through February 27, 2026, and rose to $1.03 on May 29, 2026. The $1.03 rate continued on August 31, 2026.

Full-year payments rose from $2.85 in 2020 to $2.94 in 2021, $3.24 in 2022, $3.58 in 2023, $3.74 in 2024 and $3.95 in 2025. The annual increases were 3.2%, 10.2%, 10.5%, 4.5% and 5.6%, respectively. Growth moderated after the double-digit increases in 2022 and 2023. The latest 3.0% raise is also below the five-year pace of 7.1% annual growth.

Is the dividend covered?

The dividend consumes 38% of earnings. That payout ratio indicates earnings cover the quarterly distribution while leaving capacity for lending, branch expansion and repurchases. SmarterDividends rates the dividend A with a safety score of 99, meaning very safe within its 80-100 scoring band. The grade reflects the earnings coverage and long growth record, although bank dividends remain dependent on credit quality, capital and regulatory limits.

Cullen/Frost is a holding company that relies primarily on distributions from Frost Bank. Its first-quarter Form 10-Q said both entities exceeded applicable capital requirements and that banking regulations can limit distributions to the parent.

Yield and valuation

At a share price of $155.40, the $4.12 annual dividend produces a 2.67% forward yield. That is below the Financial Services sector median forward yield of 5.70%, giving CFR less current income than the sector benchmark despite its high safety grade. An investor holding 100 shares would receive $412.00 in annual income at the new rate.

SmarterDividends estimates fair value at $234.69 and classifies the shares as undervalued, with 47% upside to that estimate. The stock’s one-year price return is a 29.8% gain. The valuation figures are distinct from coverage: yield compares income with market price, while the safety assessment addresses the company’s capacity to maintain the payment.

What to watch

The next earnings report will show whether the loan, deposit and net interest income trends that accompanied the increase persisted. Management’s full-year 2026 guidance called for taxable-equivalent net interest income growth of 4.75% to 5.25%, average loan growth of 7% to 8%, noninterest income growth of 7.5% to 8.5%, and noninterest expense growth of 4.5% to 5%. The second-quarter earnings call transcript also said five additional branches were planned for the balance of 2026.

Credit quality and capital deployment are the other markers. Second-quarter nonaccrual loans rose to $112.7 million from $72.4 million in the first quarter, although management said criticized loans declined. Cullen/Frost had $140.0 million remaining on its $300 million repurchase authorization at the end of the second quarter, with the program expiring in January 2027. Credit costs, expansion spending, repurchases and regulatory capital will frame the next dividend decision.