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Feb. 13, 2021, 9:19 a.m. EST

24 bank stocks with dividends of at least 3.57%, three times what 10-year Treasurys pay

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By Philip van Doorn

When the coronavirus pandemic hit the U.S. full force in March, bank stocks sank because investors’ memories of the credit crisis of 2008 — and the dangers of holding bank stocks during a recession — were still fresh.

Now banks are on the upswing, but the stocks are still cheap.

Below are three screens of bank stocks by dividend yield, and price-to-book and price-to-earnings valuations.

Table is set

Capital One Financial Corp. /zigman2/quotes/204480509/composite COF +0.07% was one of only two large national U.S. banks to cut its quarterly dividend to shareholders during the pandemic. The other was Wells Fargo & Co. /zigman2/quotes/203790192/composite WFC -1.25% .

Capital One cut its quarterly payout to 10 cents from 40 cents in July. Then on Feb. 4 the 40-cent quarterly dividend was fully restored.

After a dividend cut, a company might be expected to increase its payout gradually as economic or business conditions improve, but Capital One’s confident move signals that “the banks have come full circle,” according to Christopher Marinac, director of research at Janney Montgomery Scott. The firm provides investment banking and other services to banks, and Marinac’s analyst group covers hundreds of small and regional players.

“Banks trade off tangible book value and future earnings,” Marinac said during an interview. “When the crisis began in March, everyone began to mistrust earnings and book value,” because they feared both were threatened by loan losses.

Now, almost a year later, after banks set aside reserves for anticipated loan losses (which lowers earnings) and more recently started to transfer money away from reserves (which boosts earnings), Marinac believes “credit is no longer a problem.” That’s even as moratoriums on foreclosures and evictions are expected to be lifted as the pandemic subsides.

“Banks know what they have out there — they know what the forbearance risk is and a lot of it has been incorporated into loan loss reserves,” he said.

Marinac said the provisions for loan loss reserves by Bank of America Corp. /zigman2/quotes/200894270/composite BAC -0.93% and J.P. Morgan Chase & Co. /zigman2/quotes/205971034/composite JPM -2.11% during the first half of 2020 were “some of the biggest percentage builds I have every seen.”

Wells Fargo cut its quarterly dividend to 10 cents a share from 51 cents in July. The bank hasn’t yet announced any dividend increase and its situation is much different from Capital One’s, because of continued scrutiny by regulators (and politicians) after several customer service scandals that first came to light in 2016.

Marinac called Wells Fargo “this era’s J.P. Morgan Chase,” referring to JPM’s years of fines paid to regulators in the wake of the 2008-2009 credit crisis.

“The answer is keep writing checks to various agencies. That is a way out of a ditch,” Marinac said.

Looking ahead, in light of Wells Fargo’s capital strength, “the question is when they can get back” to deploying capital through share buybacks or dividends, he added.

Odeon Capital Group analyst Richard Bove rates Wells Fargo a “buy,” with a price target of $37.10, which is 14% above the stock’s closing price of $32.56 on Feb. 5. Then again, a 12-month price target doesn’t tell the full story. In a note to clients on Jan. 17, Bove wrote that for the next three to five years, Wells Fargo “could be a superior investment if anyone chooses to look out that long.”

He said the bank’s new management team “has enunciated a program that is likely to turn this company around.”

Cheap stocks

From the end of October through Feb. 5, the S&P 500 financial sector returned 41%, while the full S&P 500 /zigman2/quotes/210599714/realtime SPX -0.92% returned 19%. Now take a look at the one-year chart through Feb. 5:

/zigman2/quotes/204480509/composite
US : U.S.: NYSE
$ 133.00
+0.09 +0.07%
Volume: 2.31M
April 22, 2021 4:00p
P/E Ratio
26.10
Dividend Yield
1.20%
Market Cap
$60.69 billion
Rev. per Employee
$607,868
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/zigman2/quotes/203790192/composite
US : U.S.: NYSE
$ 42.70
-0.54 -1.25%
Volume: 24.64M
April 22, 2021 4:04p
P/E Ratio
29.52
Dividend Yield
0.94%
Market Cap
$179.06 billion
Rev. per Employee
$293,069
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/zigman2/quotes/200894270/composite
US : U.S.: NYSE
$ 38.36
-0.36 -0.93%
Volume: 48.09M
April 22, 2021 4:00p
P/E Ratio
16.44
Dividend Yield
1.88%
Market Cap
$332.59 billion
Rev. per Employee
$445,624
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/zigman2/quotes/205971034/composite
US : U.S.: NYSE
$ 147.37
-3.17 -2.11%
Volume: 15.26M
April 22, 2021 4:00p
P/E Ratio
11.70
Dividend Yield
2.44%
Market Cap
$456.45 billion
Rev. per Employee
$498,110
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/zigman2/quotes/210599714/realtime
US : S&P US
4,134.98
-38.44 -0.92%
Volume: 2.39B
April 22, 2021 5:32p
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