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Contrarian Value Play: Dividend Champion Banks For Double-Digit Return

Published Thu, 03 Sep 2020 06:43:15 -0400 on Seeking Alpha

Seeking AlphaDividend StrategyContrarian Value Play: Dividend Champion Banks For Double-Digit ReturnSep. 3, 2020 6:43 AM ET|| Includes: AROW, AUBN, BANF, BHB, BMRC, BMTC, BOKF, CBSH, CBU, CFR, CTBI, FCAP, FLIC, FMCB, FRBAX, FSRBX, HBNC, KBE, KRE, NKSH, NWFL, OZK, PB, PBCT, QABA, SBSI, SRCE, SYBT, THFF, TMP, UBSI, UMBF, WABC, WASHby: Richard J. ParsonsRichard J. Parsons Banks10X Risk Management LLC.cls-1{fill:#024999;}SummaryOnly 29 US publicly traded banks have increased dividends annually since 2004.
These Dividend Champions as a group today have a record high dividend yield and record low valuation.
The Dividend Champions have a current payout ratio and ROE in line with historical metrics.
Investors who think it is time to rotate from Growth to Value may want to consider this group of banks that have a surprisingly low Beta.
While the COVID-19 economy risks loom large, value investors may find this group of banks attractive as a safer alternative than buying bank ETFs that have historically underperformed the bank Dividend Champions.
The Bank Dividend Champion Honor Roll
In my book, Investing in Banks (2016, Risk Management Association), one chapter analyzed 31 publicly traded banks that increased their dividends annually from 2004 through 2014.
Less than 10% of all US banks increased dividends during the 2008-09 Great Panic. At that time, 25% of the publicly traded banks eliminated dividends, 40% cut dividends but kept paying a smaller amount, and 17% kept their dividends at the same rate as pre-Panic. (Another 7% did not pay dividends.)
Given the success of these 31 Dividend Champion banks, it should come as little surprise that only two of the banks have been sold through merger during the past six years. During that same time, the total number of US banks shrank by more than 22%. The vast majority that sold were underperforming banks that consistently failed to generate returns sufficient to cover cost of capital.
In contrast, as this... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
PEOPLE'S UNITED FINANCIAL 16.06   12.3 1.31 0.71 4.52
WASHINGTON TRUST BANCORP 50.06   12.6 3.98 2.04 4.22
BAR HARBOR BANKSHARES 23.08   0.0 0.00 0.88 3.91
SOUTHSIDE BANCSHARES 34.67   15.8 2.19 1.24 3.68
NATIONAL BANKSHARES 39.67   0.0 0.00 1.34 3.67
UNITED BANKSHARES 39.53   15.7 2.52 1.36 3.53
COMMUNITY TRUST BANCORP 42.32   11.5 3.67 1.52 3.51
CULLEN/FROST BANKERS 90.05   12.7 7.11 2.84 3.20
ARROW FINANCIAL 35.31   14.4 2.46 1.04 3.09
THE FIRST OF LONG ISLAND 23.75   0.0 0.00 0.68 2.97
NORWOOD FINANCIAL 32.74   0.0 0.00 0.96 2.94
HORIZON BANCORP (IN) 17.52   13.2 1.33 0.48 2.83
S.Y. BANCORP 38.26   14.5 2.64 1.04 2.78
AUBURN NATIONAL BANCORP 41.20   0.0 0.00 1.00 2.64
WESTAMERICA BANCORP 64.49   23.0 2.80 1.64 2.59
BOK FINANCIAL 80.37   11.9 6.76 2.00 2.50
FIRST FINANCIAL 43.79   12.1 3.63 1.04 2.48
TOMPKINS FINANCIAL 83.85   0.0 0.00 2.00 2.47
COMMUNITY BANK SYSTEM 66.00   20.2 3.27 1.64 2.40
PROSPERITY BANCSHARES 70.40   14.9 4.73 1.64 2.39
1ST SOURCE 47.60   14.2 3.35 1.08 2.36
BANCFIRST 56.95   14.4 3.94 1.28 2.17
BANK OF MARIN BANCORP 43.23   0.0 0.00 0.84 2.02
UMB FINANCIAL 66.08   16.4 4.02 1.20 1.88
COMMERCE BANCSHARES 60.78   16.2 3.75 1.04 1.74
FIRST CAPITAL 57.79   0.0 0.00 0.96 1.73

PEOPLE'S UNITED FINANCIAL - PBCT
PEOPLE'S UNITED FINANCIAL - PBCT  


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