Consider Regional Banks for Value and Income

Bob is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

The prospect of investing in banks probably brings up the usual suspects for most investors; namely, the nation’s biggest bulge-bracket banks usually come to mind for any investor considering the financial services sector.  However, while America’s biggest banks have been hampered by issues ranging from legal settlements to massive trading losses, there are a number of smaller banks that are doing quite well.  Regional banks, which are banks that offer financial services to a particular region of the United States, may be a great place to look for investors interested in dividend-paying banks.  The following are a few regional banks trading at or below book value that provide attractive dividends to shareholders.

New York Community Bancorp (NYSE: NYCB) is a $6 billion regional bank offer banking products and services in New York, New Jersey, Ohio, Florida, and Arizona.  New York Community Bancorp is currently trading at its book value.  The company pays $1 per share in dividends annually.  As a testament to the company’s solid financial position, the company did not have to cut its dividend during the depths of the 2008-2009 financial crisis.  The dividend is nothing to sneeze at—at recent prices, the stock has a huge yield of more than 7.25%.  New York Community Bank reported fiscal fourth-quarter and full-year adjusted earnings that both increased by a penny per share versus the prior year.

KeyCorp (NYSE: KEY) operates as a holding company for KeyBank National Association that provides various banking services in the United States.  KeyCorp has a compelling valuation, trading for only 10 times trailing earnings, with a forward price-to-earnings ratio of less than 10.  Furthermore, the stock trades for a price-to-book ratio of only 0.88.  The company raised its dividend by 67% in 2012, and at recent prices, yields slightly more than 2%.  Last month, KeyCorp reported 2012 total revenues increased nearly 4%, including a 10% increase in total revenues in the fourth quarter versus the prior year.

Huntington Bancshares (NASDAQ: HBAN) is a $6 billion regional bank that provides commercial, small business, and consumer banking services.  The company is headquartered in Ohio and provides its services primarily in the Midwest.  Huntington, like KeyCorp, trades for only 10 times trailing earnings.  The stock trades at a slight premium to book value and has a dividend yield north of 2.2%.  Huntington reported quarterly and full-year earnings at the end of January, and the results were largely positive.  The company earned $.19 during the fourth quarter, up 36% year over year, and its net charge-off ratio dropped, indicating higher credit quality of the bank’s underlying loans.

The Bottom Line

Although these banks may be under the radar for most investors, they are currently operating profitably and offer dividends that compare favorably to the paltry yields of many of their large-cap banking peers.  Each investor interested in regional banks would be wise to dig more deeply into each of these companies, but for an investor interested in the financial services industry, this list might be a great place to start.


Robert Ciura has no position in any stocks mentioned. The Motley Fool owns shares of Huntington Bancshares and KeyCorp. 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!

blog comments powered by Disqus