U.S. Bancorp: A Stronger Buy After The Stress Tests

Mar.14.12 | About: U.S. Bancorp (USB)

The latest stress test results help bank stocks on Tuesday. Several announced new buybacks and dividend increases. I believe investor sentiment should continue to improve for the stronger banks. One I particularly like at these levels is U.S. Bancorp (NYSE:USB).

6 reasons USB is a good bargain at $31 a share:

  • It just announced it raised its annual dividend 56% and will now yield 2.5%. I would expect future significant dividend increases as the economy continues to improve.
  • Management announced they will also buy back up to 100mm of outstanding shares.
  • Earnings are showing good improvement. The company earned $2.41 a share in FY2011 and analysts have it making $2.68 in FY2012 and $2.93 in FY2013.
  • It has beat earnings estimates each of the last four quarters and consensus estimates for FY2012 and FY2013 have gone up over the past three months.
  • The stock has a cheap five year projected PEG (1.05) for a solid yielding bank stock.
  • The stock continues to improve technically and it is solidly above its 200 day moving average (See Chart)

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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.