For those looking to generate a stream of income, dividend investing may be the way to go. For example such a strategy could create cash to be used on a rainy day, or for those interested in DRIP strategies (like myself) to pick up more shares in a specified company. In the article I wanted to focus on two very inexpensive regional banks that I think are perfect for the value investor who may be looking to generate some secondary income.
American National Bancshares, Inc. (AMNB) declared a $0.23/share quarterly dividend on November 21, which is in-line with the company's previous distribution. It also announced the date for its regular dividend distribution, which is now set for December 21st to shareholders of record as of December 7th. As a result of the announcement, the company now yields 4.75% ($0.92) on an annual basis, which is then broken down and distributed to shareholders each quarter.
In my opinion there are three positive catalysts to consider when it comes to AMNB. From a value perspective shares currently possess a P/E ratio of 9.09 and trades at an 8.20% discount to its 50 DMA and a 17.67% discount to its 200 DMA. The second thing to consider is the fact that the company has surpassed analysts' estimates by an average of 9.23% in each of the last four quarters. Lastly, and most importantly, the company presents a very nice value proposition when using Graham's Number. AMNB's diluted TTM earnings per share at 2.13, and a MRQ book value per share value at 20.66, implies a Graham Number fair value = SQRT (22.5*2.13*20.66) = $31.46. Based on the Wednesday's closing price of $19.37, this implies a potential upside of 38.42% from current levels.
WesBanco, Inc. (WSBC) declared a $0.18/share quarterly dividend on November 21, which is in-line with the company's previous distribution. It also announced the date for its regular dividend distribution, which is now set for January 2nd to shareholders of record as of December 7th. As a result of the announcement, the company now yields 3.46% ($0.72) on an annual basis, which is then broken down and distributed to shareholders each quarter.
When it comes to WesBanco there are a few positive catalysts for potential investors to consider. From a value perspective shares currently possess a P/E ratio of 11.72 and trades at a 5.08% discount to its 50 DMA and a very slight 2.74% premium to its 200 DMA. The second thing to consider is the fact that the company has surpassed analysts' estimates by an average of 15.80% over the last four quarters, led by a strong increase in loan growth and net interest income. Paul Limbert, WesBanco's President and CEO, noted, "The third quarter of 2012 included many accomplishments resulting in solid growth in WesBanco earnings. The second consecutive quarter of loan growth and reductions in the cost of funds provided an increase in net interest income compared to last quarter. Credit quality improvements have resulted in a lower loan loss provision in this quarter which contributed to improved earnings. Credit quality continues to improve with non-performing loans decreasing in each of the last three quarters while criticized and classified loans have decreased for four consecutive quarters."
For potential investors looking to establish a position in either American National Bancshares or WesBanco, I'd continue to take a closer look at each company and keep a watchful eye out for such things as an improvement in earnings growth or an increase in the company's dividend. As is the case with any of the regional banks, the slightest hint or indication of negative news with regard to overall earnings or product specific performance and a sell-off could certainly ensue. If potential investors are looking to scoop up shares based on value, I'd do so with a medium to moderate position and add to that position as dividends are announced.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.