Financial stocks got a bad rap after the whole financial crisis – sure, they lost a lot of money, but the economy is on the rebound, and so are financial stocks. We recently took a look at some of the financial stocks on the market and found four that deserve some extra attention. They are mid-cap and, like many mid-cap financial stocks, they tend to have a higher dividend yield than their larger counterparts. The stocks on our list also carry analyst recommendations of a strong buy and have generous upside predicted.
Toronto-Dominion Bank (TD) has a $64.53 billion market cap and, as of the close of trading on December 12, is trading at $71.18 a share; that’s 9.45 times its forward earnings. TD has a one-year target estimate of $92.62 and pays a $2.68 dividend (3.70% dividend yield). The company boasts a quarterly revenue growth of 15.60% and carries an earnings growth estimate of 12.00%, compared to 9.17% for its industry and 10.02% for its sector. The company just opened a branch in Toronto’s Chinatown that is open seven days a week, and has the staff on hand to serve customers in three languages – Cantonese, Mandarin and English. It is only the latest in TD’s network of almost 1,200 branches in Canada and almost 1,300 locations strung from Maine to Florida. Daniel Bubis’ Tetrem Capital Management had more than $405 million invested in the company at the end of the second quarter.
Westpac Banking Corporation (WBK) has a $64.54B market cap and a little less upside than TD – it closed trading on December 12 at $106.43 a share with a one-year estimate of $127.47 – but it pays a much larger dividend at $8.28 a share (7.50% dividend yield). Plus, WBK is priced well. It is trading at 9.29 times its current earnings and 9.49 times its future earnings. WBK’s quarterly revenue growth is modest at 3.70%, and its earnings growth estimate isn’t much better, at 2.70% per annum for the next five years, but it is stable. WBK, which is the second-largest lender in Australia, recently decided to overhaul its management; specifically, it is looking to bring its brands together under two divisions – one focused on technology, banking operations, property services and legal, the other on the bank's retail and business banking, wealth management and risk management operations. If the move is successful, the gains could be even greater. Both Steve Cohen’s SAC Capital Advisors and Israel Englander’s Millennium Management initiated new positions in the company during the second quarter.
Banco Santander (STD) is big in the Spanish-speaking world. Its operations are centered on Spain, Brazil and other Latin American countries although it does have locations in the U.S., the UK and continental Europe. STD has a $64.06B market cap. It closed trading Monday, December 12 at $7.59 with a one-year target estimate of $9.52 and pays a 61 cents dividend – that’s a 7.70% dividend yield. Perhaps more impressively though, STD is trading at 6.83 times its current earnings, and 6.02 times its forward earnings. It has 7.60% quarterly revenue growth and its earnings are expected to grow 12.10% per annum over the next five years compared to 9.17% for its industry and 10.02% for its sector. STD was a top holding for Ken Fisher’s Fisher Asset Management at the end of the second quarter.
Prudential (PUK) provides fund management services for individuals and institutional clients. It has a 24.90B market cap. It closed trading on December 12 at $19.59 a share with a one-year target estimate of $25.10 a share and it pays a 49 cents a share dividend (2.40% dividend yield). It is trading at 8.61 times its earnings. The company looks pretty good. It has 26.80% quarterly revenue growth and strong earnings growth estimates. Analysts estimate its earnings will grow by 9.00% per annum over the next five years, compared to 9.79% for its industry and 10.02% for its sector. Ken Fisher’s Fisher Asset Management and Israel Englander’s Millennium Management are both fans of the company.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.