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Accumulating High Quality Dividend Champ Texas Bank Reasonably Priced With Insider Buying

Published Fri, 28 Sep 2018 09:27:36 -0400 on Seeking Alpha

Purpose of this Post The purpose is this post is to describe why I recently began buying more shares in Cullen/Frost Bankers Inc. (CFR). The analysis is divided into five parts.
My CFR investment history Why CFR is considered a High Quality bank Business model and balance sheet review. Price-to-earning ratio overview Risks that threaten CFR Part 1: My CFR Investment History About five years ago I invested in a group of High Quality banks located in different geographies and of different sizes. Each had a distinguished history of Operational Excellence and returns on equity consistently greater than their cost of capital. CFR was one of those banks bought for this buy-and-hold bank portfolio.
In February 2016 I bought more shares in CFR a day after learning that CFR’s long-time CEO bought nearly $2 million shares at $48.93 a share. I wrote about this event in a September 29, 2016 Seeking Alpha post that compared the absence of insider buying at Wells Fargo (WFC) to the buying of shares by the CEOs/chairs at CFR, Citicorp (C), JPMorgan Chase (JPM), and KEY (KEY). Chart 1 below is a graphic from the September 2016 analysis. Data from www.openinsider.com.
Chart 1

Cullen/Frost's CEO’s purchase was especially compelling since he had already announced his retirement and owned a lot of CFR. He had little reason to accumulate more shares beyond a strong conviction that the bank's stock price was too cheap to ignore. He proved right. Chart 2 shows how... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
KEYCORP 17.38   10.1 1.72 0.68 3.81
WELLS FARGO 45.30   10.0 4.52 1.80 3.80
JPMORGAN CHASE 115.12   12.4 9.26 3.60 2.78
U.S. BANCORP 53.04   12.7 4.18 1.48 2.76
BOK FINANCIAL 77.36   11.8 6.58 2.00 2.54
CITIGROUP 71.32   9.9 7.19 1.80 2.51
PROSPERITY BANCSHARES 67.46   14.3 4.72 1.64 2.41
BANK OF AMERICA 28.99   10.8 2.69 0.60 2.04
COMMERCE BANCSHARES 58.52   15.6 3.75 1.04 1.75


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