Fighting for the People's
Kyle is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Many investors are skeptical of the financial industry because of its performance during the economic crisis. Interestingly, even skeptics can find themselves trusting the very names they swore away because of their influence over the entire market. Take it from a more conservative investor, I stay away from the big banks. I also know that there is more to the financial sector than meets the eye, such as high quality stocks; queue in People's United Bank (NASDAQ: PBCT).
If you don't live in New England, you may find yourself guilty of a knee-jerk reaction to stay away because you have never heard of this institution. A quick search will tell you that the bank (with many names and changes) has been around for 170 years. According to Barron's, the bank was reported to have over $2 billion on its balance sheet. Small name, big money.
For the Fools who prefer to skim instead of read, I'll give you the kicker first, a 5.4% dividend achieved by increasing yields each year since 2007. It's a tough find among industry peers, and shows no sign of slowing down because People's is just starting to knock on the doors of cash kingdoms of Boston and New York.
Taking that last thought into account, understand that this bank does not have a significant presence in any metropolitan area other than Hartford, CT. People's is all over Connecticut, but with acquisitions of companies in the Boston area and Long Island, it will expand its reach to millions of people. With net income already at $199 million in the less populous states of New England, this number is bound to grow substantially with these new marketplaces.
Now for a look at a juggernaut player in my investing strategy: cash flow. For banks, cash flow can scare investors because of negative numbers when it comes to investing cash flow and financing cash flow. Unfortunately, People's United is "in the red" in both of these categories, but so was JP Morgan Chase (NYSE: JPM) when it lost over $2 billion this past spring. Fools shouldn't forget about these losses, but instead of lingering over them, we should look at improvement upon mistakes. People's has bettered investing cash flow and financing cash flow by 82% and 93%, respectively over the past two years. This improvement will allow the company to continuously increase its payout to shareholders while generating the capital to expand and develop its operations.
Not all financial institutions make the headlines of the Wall Street Journal. As a new Fool, I want to be a voice for companies that are making some noise in the background. The markets need banks to succeed. A sustainable bank with a clear mission on improvement will allow investors to trust the sector a little bit more, but others can follow their example. Take a drive through Connecticut and find the billboard if you want a more in-you-face fact: "180 years. No bailouts."
KyleVaughan has no positions in the stocks mentioned above. The Motley Fool owns shares of JPMorgan Chase & Co. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!