| Valuation method | Value, $ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 43.41 | 70 |
| Intrinsic value (DCF) | 192.31 | 655 |
| Graham-Dodd Method | 72.28 | 184 |
| Graham Formula | 163.31 | 541 |
Popular Capital Trust II (NASDAQ: BPOPM) is a statutory trust operating in the financial services sector, specifically within the banking industry. As part of Popular, Inc., it primarily engages in issuing capital securities, including preferred stock, to support the financial stability and growth of its parent company. With a market capitalization of approximately $2.46 billion, BPOPM plays a strategic role in Popular, Inc.'s capital structure, offering investors a fixed-income alternative with a 6.125% dividend yield. The trust is headquartered in the U.S. and trades on the NASDAQ Global Select Market. Its financial performance in 2021 reflected strong fundamentals, including $2.12 billion in revenue and $934.9 million in net income, underscoring its importance within Popular, Inc.'s diversified financial operations. Investors seeking exposure to stable, income-generating financial instruments may find BPOPM an attractive option due to its guaranteed dividend structure and backing by a well-established banking entity.
BPOPM presents a compelling fixed-income investment opportunity, particularly for income-focused investors, given its 6.125% dividend yield and backing by Popular, Inc., a well-capitalized banking institution. The trust's strong 2021 financials, including $934.9 million in net income and $1.53 in dividends per share, highlight its ability to generate consistent returns. However, as a preferred security, BPOPM carries interest rate risk—its value may decline if interest rates rise. Additionally, its negative beta (-0.028) suggests low correlation with broader market movements, which could appeal to investors seeking diversification. While the lack of capital expenditures and stable cash flow ($784.8 million in operating cash flow) indicate financial health, potential investors should weigh the trade-off between yield and the subordinate position of preferred shares in the capital structure.
BPOPM operates in a niche segment of the financial services industry, primarily competing with other preferred securities issued by banking institutions. Its competitive advantage lies in its association with Popular, Inc., which provides a strong financial backing and enhances investor confidence. The trust's 6.125% dividend yield is competitive compared to other fixed-income instruments, particularly in a low-interest-rate environment. However, BPOPM's appeal is limited to income-seeking investors, as it lacks the growth potential of common equity. Its negative beta indicates it may serve as a hedge against market volatility, but this also means it may underperform during bullish markets. The trust's capital structure position—subordinate to debt but senior to common equity—offers a balance of risk and return, though it remains sensitive to Popular, Inc.'s overall financial health. Unlike common stocks, BPOPM does not benefit from capital appreciation, making it less attractive to growth-oriented investors. Its primary competitors are other bank-issued preferred securities, which often offer similar yields but may vary in terms of issuer creditworthiness and dividend sustainability.