Regional banks have one major competitive advantage over national banks right now: They are hated less. There is no national campaign being launched against them and for the most part they are not getting bad press. During bank transfer day we saw thousands of people move their bank accounts out of national banks like Bank of America (BAC) and Wells Fargo (WFC). Most of the bank transfer day crowd went to credit unions while some moved their accounts to regional and community banks.
A growing number of people are becoming frustrated with their bank. I personally moved my accounts over to SunTrust (STI) not because I thought it was a better bank but because I was not satisfied with my previous bank that I had been with for 13 years. Large banks have become arrogant and believe people won’t move their accounts due to the effort involved. But just like me, plenty of people are willing to put in the work.
Financial stocks, especially banks, are very volatile right now. We are seeing them get pushed around by any hint of news out of Europe. Long term dividend investors can use that volatility to buy stocks on dips when they see good long term value. We put together a list of 4 regional banks with solid fundamentals and dividend yields over 3%.
Southside Bancshares (SBSI)
Southside Bank operates out of Texas where it has 48 banking centers. The company is a community focused bank offering traditional services to their customers. About one third of their banking centers are located in grocery stores in Texas.
SBSI has a dividend yield of 4.1% which is well above its 5 year average. The 5 year dividend growth rate is strong at 20%, the three year net income growth rate is over 33% and the payout ratio is a very low 37%. SBSI recently beat expectations with its Q3 results and is one of the highest rated top dividend stocks on our list.
Bar Harbor Bankshares (BHB)
Bar Harbor Bank has 12 branch offices, all located in Maine. The institution offers traditional deposit and loan services along with related banking products. The company's success is closely tied to the tourist community it serves in Maine.
Bar Harbor pays an annual dividend of $1.12 giving them a dividend yield of 3.8%. BHB has a 5 year dividend growth rate of 4.1% and a payout ratio of 38%. The dividend has increased for each of the last 7 years. Net income has grown at over 14% over the last 3 years.
Bank Of Montreal (BMO)
The Bank of Montreal is by far the biggest bank on this list with over 1200 branches. The company operates in the US and Canada but also has offices in 6 other countries in order to do business in international trading markets. This is more than your normal regional bank so if you are looking for international exposure with a home grown feel this could be the right stock for you.
BMO has a dividend yield of 4.9% and a 5 year dividend growth rate of 4.65%. That dividend growth rate is a little deceiving though because the company has kept the dividend at $2.80 since 2007. The payout ratio is only 51% which is below the 5 year average of 67%.