Patience can be painful in markets like these, as cautious investors second guess themselves from the sidelines. While profits rose for some investors, blood pressure and angst were the only things going up for others. The best remedy for what ails you is to build and monitor a solid watch list. As a reformed banker, I have not been in love with the financial service sector since the crisis, but feel that with patience for a pull-back, opportunities will arise.
For in addition to healthcare (see Heathcare Stocks with Strong Dividend Histories), a strengthening economy suggests financial services may be on firming ground to deliver income and growth to investors. As a devout income-oriented advisor, my motto is "show me the dividend. Now, show me the dividend again, and again and again . ." Carrying this motto to financial services stocks with 10-year plus records for raising those dividends is tough. Big banks like Bank of America (BAC) and financial service giants like Morgan Stanley (MS) are off my radar, but there are two regional banks might have a place on your watch list; Cullen Frost Bankers (CFR) and Commerce Bancshares (CBSH).
Both names have proven themselves capable of withstanding adversity and have managed to reward shareholders with continuously rising dividends. Year-to-date performance shows these banks trailing the broader markets. CFR offers a current yield north of 3%, while CBSH slightly outpaces the S&P yield by delivering 2.26% on a forward basis. A new dividend name I'm just starting to watch is 1st Source Bank (SRCE), an Indiana-based bank, which has managed to increase its dividend for more than 10 years. Though it trailed other regional banks in 2009 and so far in 2012, its longer term performance is worth getting to know. (This is a name on my Watch List).
Outside of the banking sector, asset management companies such as Eaton Vance (EV) and T Rowe Price (TROW) have been strong performers and have boosted their dividends for more than a decade. I like to target companies with growing yields above 2.75%, which puts EV close but requires a major pullback and/or dividend increase for TROW. I have been in and out of EV, and am waiting on the market to take a breath before considering re-entry, but I do like the company. EV seems to fill a need for income-oriented retail investors, a need which isn't going away as retirees are hungry for income and boomers are building an appetite for retirement.
If you like the general theme of financial services, but want broader diversification take a look at two regional bank ETF offerings, iShares Dow Jones US Regional Bank (IAT) and SPDR S&P Regional Banking (KRE). Regional banks, in general, did not suffer the ego-sized ills of many big banks and therefore make a more conservative minded play on the banking sector. The broader diversification of these ETFs does dilute their yields, but provides a little income along the way to potential longer term growth. Again, this is a watch list item, not a raging fire-sale buy sector. But by getting these names on your radar now, you'll be intellectually (as opposed to emotionally) positioned when opportunity knocks. Conversely, you could just impatiently plunk your fortunes are on some lottery tickets, prepare for great fame and call it a day (or not).
I have no current positions in any of the names mentioned.
The above article has been written utilizing data from publicly available sources, which are believed to be reliable, and is provided for informational and educational purposes only. Investors should consider their personal situation and become intimately familiar with any investment, including its prospectus, before investing. Past performance and current yields are no guarantee of future results.