Interested in Dividends? Here are 5 Bank Stocks Worth a Look
Zacks Investment Research | Mar 10, 2021 07:36AM ET
Regular dividend paying stocks usually attract more investors as these are a steady source of income. Amid the current low interest rate environment, cash dividends return more than what can be earned from deposits in savings accounts.
So, while selecting dividend stocks, investors generally focus on dividend yield (annual dividend per share/stock’s price per share) as this reflects the percentage return on the invested amount. Higher the yield, higher the chances of selecting that stock.
Notably, as dividend yield is based on the stock’s price, lower share price indicates higher yield, making the stock attractive. However, before buying such a stock, one must ensure that it is not a dividend trap. Decline in the company’s stock price could be on account of some fundamental weakness. If the concerns persist, there is a high chance of further dip in price, and one must steer clear of such stocks.h3 Why Bank Stocks?/h3
For most of the last year, bank stocks were out of favor. Low rates, tough operating backdrop due to the coronavirus-induced economic slowdown and faltering loan demand were some of the major reasons for bearish investor sentiments.
In 2020, SPDR S&P Regional Banking ETF and KBW Nasdaq Bank Index were down 8% and 14.6%, respectively. Likewise, the Zacks Major Regional Banks industry and Zacks Banks & Thrifts industry lost 17.2% and 10.5%, respectively. Nevertheless, the S&P 500 Index rallied 18.6% over the same time frame.
Price Performance in 2020
The trend has been reversing of late. Optimism about the banking industry is primarily driven by the expectation of an accelerated recovery of the sector. The bullish sentiments can be attributed to steepening of the yield curve, extensive vaccination drive, stimulus packages and favorable economic data.
All these factors indicate that the U.S. economy is on the path for robust recovery. As banks’ financials are directly linked to the health of economy, bank stocks are gradually gaining favor among investors.
Though chances of increase in interest rates are less in the near term, steepening of the yield curve and gradual rise in demand for loans will support banks’ net interest income and margins in the quarters ahead. Banks are undertaking measures to improve operating efficiency by digitizing operations and also, through strategic acquisitions.
Get The News You Want
Further, last year, several banks had curtailed/maintained dividend levels and suspended share repurchases to preserve liquidity. However, with economy recovering at a solid pace, banks have again started raising quarterly dividends and resumed buybacks.
h3 5 Bank Stocks With Solid Dividend Yield/h3One must not miss out these favorable developments in the banking industry by sitting on the side-lines now. With the help of Zacks .
Also, these banks have the market capitalization of $1.5 billion or more and an earnings growth projection of more than 10% for 2021. Further, these five banks have witnessed price appreciation of 15% or more so far this year.
Year-to-Date Price Performance
Here are the five banks:
First Hawaiian (NASDAQ:FHB), Inc. Zacks Investment Research
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.