Published Tue, 12 Jun 2018 09:48:43 -0400 on Seeking Alpha
Utilities have been a focus for income-oriented investors over the last several years due to robust current dividend yields in a low interest rate environment. However, rising interest rates threaten the ongoing viability of this approach, especially with many utilities trading at historically high price-to-earnings ratios.
However, rising interest rates may actually benefit another sector - banking and financials - which in many ways are arguably similar to utilities in terms of risk profile yet many of which have far more modest valuations, similar (or better) incremental earnings growth opportunities, and well-protected dividend yields.
In this article, we present a pair of under-the-radar banks that may interest income-oriented investors looking to couple robust current dividend yields with an element of long-term growth.
First National Bank Alaska (OTCPK: FBAK) First National Bank Alaska is the second largest bank, by deposit market share, in Alaska, and the largest independent bank in the market. The company has a long history of very conservative operations - shareholders' equity represents nearly 14% of the company's total assets - and half of the company's deposits are non-interest bearing accounts, providing an entrenched hedge against rising interest rates. The company will likely achieve return on average assets of 1.4% in the current year and return on average equity of 10%, while loan quality experience has been stable with minimal loans charged... Read more