U.S Bancorp (NYSE:USB) is one of the best stocks in the banking industry for any investor to add to his or her portfolio. This is the most reliable and defensive stock that provides stability and favorable returns with adequate dividends set to increase over time. U.S Bancorp has one of the most conservative approaches to risk management and diversified portfolios in order to ensure growth and equitable returns for the long term. The future is looking positive on all fronts for U.S. Bancorp and its performance has been impressive for the past five years through the financial crisis. U.S Bancorp is not susceptible to many of the obstacles and inadequacies that have plagued competitors like Bank of America (NYSE:BAC) and JPMorgan (NYSE:JPM). U.S Bancorp is now poised to outperform its competitors and increase its stock price beyond its all-time high of under $40 per share.
The current stock price for U.S Bancorp is above $31 per share. This is toward the maximum of its 52-week range from $20.10 to $32.98. The current stock price is slightly below the 50-day moving average of $31.40 and above the 200-day moving average of $29.09. The beta is around one and the PEG ratio is slightly above one as well. The enterprise value is above $100 billion, which is almost $50 billion above its current market cap. This all suggests that USB's stock price is about to increase beyond its recent trend at a respectable rate with potential to grow significantly beyond its previous high mark. The price is slightly more than 12 times the earnings but only slightly above the industry average and should decrease looking forward. Both the net margin and return on equity is significantly higher than the industry averages as well. The return on equity, operating margin and net margin have all increased over the last three quarters. Sales growth increased by over7 percent from the previous year as did the annual dividend rate.
U.S Bancorp is the fifth largest bank in America and conducts business in the some of the most financially stable regions of the country. Its banks predominately serve 25 different states in the Midwest and regions to the north and west as well. Bancorp has over 3,000 locations and over 60,000 employees in the United States. It receives most of the earnings from deposits and loans from small communities and businesses in the regions it serves. Many of these regions were some of the most insulated from the financial crisis due to their conservative values and stable sources of revenue.
Bancorp focuses on improving its core functions in these communities opposed to proprietary trading schemes like JPMorgan or large acquisitions like Bank of America. U.S Bancorp has already passed the Fed's stress test and surpasses the mandated 7 percent minimum Basel III guidelines with a current equity ratio of 8.4 percent. It's also important to note that Bancorp is not susceptible to impending legislation in the Volcker Rule because it does not focus on proprietary trading and investments. The best thing about Bancorp is the diversified, conservative and stable approach it takes toward growth and operations looking forward.
Bancorp mostly focuses on smaller acquisitions that fit well into its current operations. U.S Bancorp benefits from growth in loans from small businesses and commercial real estate as well. Growth in lending and the mortgage business has helped to increase earnings through the past few quarters. The Bancorp model commits to returning 60 to 80 percent of the revenue back to shareholders through buybacks and increasing dividends. Bancorp was able to improve the annual dividend by 56 percent in the last quarter. The diversified portfolio of Bancorp insulates it from many of the dynamics and changes in economy and financial sectors that affect banks that are heavily invested in individual practices.
The diversified stream of revenue is as follows: 44 percent of its revenue comes from consumer and small business banking, 20 percent from whole banking and real estate, 28 percent from payment services and 8 percent is from wealth management and security services. U.S Bancorp has clearly been the most stable bank through the financial crisis and it is growing even stronger as its major competitors like Morgan Stanley (NYSE:MS) struggle. Right now, U.S Bancorp and Wells Fargo (NYSE:WFC) are the most promising investments in the industry. Bancorp's market share, loans and deposits have all been increasing steadily throughout the past five years.
Reliable management and a commitment to shareholders are the key factors that make USB the best investment in the industry. In the first quarter of 2012, USB returned 66 percent of its earnings to shareholders. Share buybacks accounted for 37 percent, while the dividend increase accounted for 27 percent. The annual divided is now 78 cents per share. USB was able to increase deposits by over 11 percent year over year while it increased commercial loans by over 17 percent and residential mortgages by over 19 percent. USB's commercial lending has increased throughout the past five quarters. Acquisitions of small franchise banks throughout the country from California, to Tennessee, have also contributed to improving market share significantly. Focusing on all aspects of banking without over exposure is the most important aspect of USB's measured and consistent success throughout its establishment over 100 years ago.
USB is also focused on improving its position in the mobile banking sector as well. It has applications and contracts to reach customers with iPhones, iPads and Android softwarel. These systems are fully integrated to give the customers the access needed for spontaneous purchases or credit transactions from any location. Mobile applications for credit cards and mobile banking are paramount for establishing a leadership position in the banking industry throughout the future. Creating the relationships with Apple (NASDAQ:AAPL), Visa (NYSE:V) and Fiserv (NASDAQ:FISV) will help build market share with small businesses and consumers as well. USB is consistently making positive strides in all phases of the banking industry without any bad publicity to bog it down with other competitors. This is the best defensive, long-term investment with substantial dividends in the industry.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.