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The financial sector was the biggest victim and probably the culprit at the same time for the financial meltdown of 2008. Some of the largest banking institutions suffered heavily and lost substantial value. The Federal Reserve is currently running a tight system and these banks are slowly emerging from the financial crisis. However, big players in the industry, such as Citigoup (NYSE:C) and Bank of America (NYSE:BAC) are still paying nominal dividends. Although there is a chance that soon these banks will be allowed to increase dividends, their yields are still likely to remain low.

In this article, I have identified three financial sector stocks that have attractive dividend payments, and solid growth potential. These banks have shown impressive growth over the past three years.

Bank of Montreal

Bank of Montreal (NYSE:BMO) is one of the six biggest banks of Canada, and the bank is rapidly growing in the U.S. as well. However, the majority of its income comes from the Canadian market. The bank's income can be divided into three groups: Personal and Commercial banking operations is the biggest contributor at about 40%, and Private banking group and Capital markets contribute 15% and 26%, respectively.

  • Over the past three years, BMO has shown extremely impressive growth in revenues and earnings. During 2012, BMO revenues grew by 17.6%, and earnings grew by 16.9%.
  • At the moment, BMO pays a quarterly dividend of $0.72 per share, yielding 4.61%. The company has a low payout ratio of 47%. During 2012, the bank paid $1.5 billion in cash dividends and had $31.5 billion in cash at the end of the year.
  • Bank of Montreal is the 4th largest bank in Canada and 8th largest in North America. BMO has an extremely impressive commercial loan department, which has shown solid growth over the years. Strong expected growth in commercial loan department is expected to drive BMO in the future.
  • BMO is currently trading at P/E ratio of 10.2 and forward P/E of 9.0. Furthermore, P/B and P/S ratios of BMO currently stand at 1.6 and 2.6, respectively.

U.S. Bancorp

U.S. Bancorp (NYSE:USB) is a financial holding company that offers financial services through its subsidiaries. The bank offers depository and lending services, foreign exchange, cash management and trust and investment management services. Here, I will try to list the positives for USB.

  • USB was able to weather the storm during the financial crisis of 2008-09, and the bank came out in better shape than most of its peers. The bank has shown steady growth in net revenues and earnings over the past four years.
  • At the moment, the bank pays an annual dividend of $0.78 per share, yielding 2.32%. Furthermore, most of the analysts have set the price target for the stock at $36.80 per share. The stock is currently trading at $33.57, offering substantial upside potential.
  • The financial position of the bank is incredibly strong. As I said above, the bank has been able to grow its earnings at a steady pace. Cash flows of the bank also remain strong; at the end of last year, the bank paid $1.55 billion in dividends, and had $8.2 billion in cash. Furthermore, payout ratio based on earnings is just 27% during the past twelve months.
  • US Bancorp has a structure that results in superior fee generations along with extremely effective credit underwriting. Furthermore, the bank has grown through carefully identified strategic acquisitions. USB is set to grow well in the future due to its strong operations and impressive ability to grow earnings.

Washington Banking Company

Washington Banking Company (NASDAQ:WBCO) is a registered banking holding company. The company was formed in the months of April in 1996, and its operations are conducted by its subsidiary, Whidbey Island Bank.

  • First of all, the company has been able to grow its earnings at an impressive rate. During 2012, EPS for the company grew at over 12%. Net interest income for the company went up to $83 million from $80 million at the end of 2011.
  • At the moment, the company pays an annual dividend of $0.60 per share, which results in a yield of 4.31% based on the closing price on Friday. WBCO pays about 55% of its earnings in cash dividends.
  • During 2012, the company paid cash dividends of $8 million and had $108 million in cash at the end of the year. Furthermore, total assets of the company stood at close to $1.7 billion.
  • WBCO stock is currently trading at P/E ratio of 12.77, and tangible book ratio of 1.2. Moreover, P/S and P/CF ratios stand at 2.4 and 3.0, respectively. The stock gained almost 19% over the previous year, and it is also expected to grow well during the current year.
Source: 3 Financial Stocks For Attractive Dividends And Future Growth