There are a few good reasons why investors want to add Severn Bancorp stock to their portfolios…
With dividend payments and potential revenue growth from lending to the medical marijuana industry in Maryland, many people have been wondering if they should buy Severn Bancorp stock.
After all, it’s not every day that you find a company that is serving an emerging industry and paying out a dividend to shareholders.
That dividend could be used as income. So each quarter, you could send it to your bank account and use it just like you would if a check was sent to you.
You could also use that dividend payment to buy more shares of Severn Bancorp Inc. (Nasdaq: SVBI).
And as we said earlier, Severn is also starting to serve the medical cannabis industry, which is an industry that has trouble finding banks to work with.
But the decision of whether to buy Severn Bancorp Inc. stock involves much more than just looking at the dividend and one industry it serves.
Let’s start by looking at some of the benefits of buying banking stocks.
The Potential Benefits of Buying Severn Bancorp Inc.
One of the reasons Warren Buffett invests in banks stocks is because banking is viewed as an industry that will always be around.
People and companies will always need some type of currency to purchase goods and services, so banking is a very durable industry.
Also, banks can generate a huge return from lending money. For example, a bank may pay you an interest rate of 1% for you to put your money in their savings account.
The bank could then go and provide personal loans with that money to other people, with interest rates ranging anywhere from 6% to 36%.
That huge markup is why banks are able to pay customers to store their money.
Also, a lot of banks – including Severn – pay dividends. And as we mentioned earlier, dividends offer a lot of benefits.
But there are also risks in buying bank stocks.
The Risks in Owning Shares of Severn Bancorp Inc.
The risk in owning any bank stock largely depends on the quality of the loans the bank is lending.
Most banks expect a few people or businesses to default on their loans, but if there are strict guidelines in place for what it takes to get a loan, defaults should be few and far between.
Also, good bank executives create a buffer to make sure that if a loan is defaulted on, the bank will have the funds to cover it.
But if a bank gets a little careless in who it loans money to, that’s when you start to have issues.
If people are qualified for loans that they really can’t afford and a recession starts to unfold, a bank could be left with a ton of defaults that it may struggle to cover.
Also, if there is a recession, businesses will not seek out as many loans, and banks can’t make a nice premium on lending money.
Also, if interest rates are too high, people will not want to take out loans.
All of the issues above – the good and the bad – can affect bank stocks.
Now, let’s take a closer look at how Severn operates.
The Severn Bancorp Stock Dividend Payout
Severn Bancorp decides to reward its shareholders with a dividend payout.
The company increased its dividend payout 33% in Q2 2019 from the payout in Q1 2019.
This payout is currently $0.16, which is a dividend yield of 1.98%.
Is Now the Time to Buy Severn Stock?
With Severn working with medical marijuana companies in Maryland and the legal cannabis industry in North America exceeding $10 billion in sales in 2019, a lot of people are wondering if this is the right time to buy Severn Bancorp stock.
Severn isn’t a pure-play cannabis stock, but it is something that is known as an ancillary cannabis stock.
What that means is that Severn doesn’t make money directly from cannabis like growers and dispensaries.
But it still makes money from working in the industry by providing financial services to medical marijuana companies in Maryland.
Of course, there are still a lot of people who don’t even know that Severn is working with Maryland cannabis companies.
To make sure investors have the opportunity to access that kind of information not just about Severn but about every cannabis company, we launched NICILytics.
NICILytics is the most comprehensive cannabis database on the planet.
Our current members have full access to our NICILytics Showcase on Severn Bancorp Inc. right here.
You are also free to learn more about NICILytics and how it will take your cannabis investing research to the next level right here.
To your investing success,
NICI Staff Reports
One response to “Should I Buy Severn Bancorp Stock?”
October 21 2019