Over the last year the financial industry has taken a beating. Many banks have failed while others have taken drastic measures to preserve their future. The markets have recognized the turmoil this and punished bank stocks. Historically, financials are some of the most consistent and highest yielding stocks. As such, they are a cornerstone of most dividend/income portfolios. In my personal portfolio, I held six bank stocks at the beginning of the year. Year-to-date through October 31st, I had earned positive returns on two of them:
2. U.S. Bancorp (USB) - October YTD Return 0.8%U.S. Bancorp was formed through the February 2001 merger of Minneapolis-based U.S. Bancorp and Milwaukee-based Firstar Corp. With almost 2,500 branches throughout the U.S., we view USB as well diversified geographically. USB has a strong market share in many of the areas it competes in. Its low-cost model, geographic and product diversity, large existing customer base, and scale give it a competitive advantage over many of its peers.
Yield: 6.18%
Last Dividend Increase: January 2008 ($0.40 to $0.425)
Buy Below Price: $24.52
Current Price: $27.51
Last Reviewed: 12/27/07
1. BB&T Corporation (BBT) - October YTD Return 19.7%BB&T Corp has a large presence in its home state of North Carolina, as well as in Virginia, with additional offices in Georgia, South Carolina, the District of Columbia, and seven other states. The company exhibits strong credit quality of its loan portfolio, high net interest margin, high loan loss reserves and a long history of profitability.
Since the end of October the market has continued to exhibit a high degree of volatility. As of November 10, 2008 only BBT remains in positive return territory. Be sure of one thing, there will be winners that emerge at the end of this financial crisis. There is also a great deal of risk associated with financials, so do your homework before making any buy/sell decisions.
Yield: 6.10%
Last Dividend Increase: August 2008 ($0.46 to $0.47)
Buy Below Price: $35.79
Current Price: $30.81
Last Reviewed: 6/23/08
Disclosure: Long USB and BBT.
(Photo: Adrian van Leen)
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I'm just curious what you identify as USBancorp's low cost advantage.
Anon: I think USB is a very effeciently run bank with a low cost structure. Their % Expense/Operating Revenue over the last 5 years ranged from a low of 44.3% in 2005 to a high of 49.6% in 2007.
For comps over the same period consider:
BAC 47.9%-56.0%
JPM 58.6%-97.7%
C 72.2%-87.3%
WFC 58.2%-64.8%
Best Wishes,
D4L
The thing I don't like about both banks is the high DPR (especially USB). They could be the most stable banks out there.. but that doesn't mean that there is further room for dividend growth.