Let me take you on a tour of several smaller bank companies paying 4% - 5% dividends. There are opportunities to collect better payments from their dividends than one can receive in interest from their CDs. Investor psychology toward banks and the banking system in the United States has driven down the price of many sound, well-run companies making their dividends rewarding. A review of three regional bank stocks, Univest (UVSP), Ohio Valley Banc Corp (OVBC) and People's United Financial (PBCT), follow below. When investor psychology toward banks change, the price of these companies should rise offering some capital gains as well.
Univest is community bank located in southeast Pennsylvania. Its offices are located in Bucks, Chester and Montgomery Counties. The bank offers a full range of services including insurance, investments and retirement planning. At today's closing price of $15.68 (6/11/12) USVP's dividend returns around 5%.
- Income per share increased 36% from same quarter last year
- Loans & leases increased $17.7 million from same quarter last year
- Deposits increased $64.4 million from same quarter last year
- Non-interest income increased 42% from same quarter last year primarily from positive real estate adjustments
- Non-performing loans and leases remained at a little over 3% which is the same as last year
- Pays a quarterly dividend of $.20 per quarter
- Payout ratio is 71%
Historical data on USVP (S&P)
- ROA is beginning to recover: from 2009 to 2011 it moved from o.5 to 0.9
- Prior to recession in 2005 the ROA was 1.1
- Book value at the end of 2011 was $13.03 per share
- Some recent minor inside buying
- Some recent institutional selling
- Graph shows upward 200 day moving average (IB Brokers graph)
Ohio Valley Banc Corp.
Ohio Valley Bank is a community bank serving the Gallipolis, Ohio area with 15 branch offices and 7 consumer finance offices. Several of these offices are located across the line in West Virginia. At today's closing price of $19.57 OVBC's dividend returns around 4.25%.
- Income per share increased 29% from the same quarter last year
- Net interest margin increased to 4.41% from 4.25% from same quarter last year
- Net interest income decreased 3.2% from same period last year with a $65 million dollar decrease in loans
- Non-interest income decreased 4.9% from same period last year due to lower tax revenue fees even though volume was higher
- Pays a quarterly dividend of $.21 per share
- Payout ratio is 58% (S&P)
- Paid a special $.04 dividend on June 11, 2012
Historical data on OVBC (S&P)
- ROA is showing signs of recovering from 0.6 last year to 0.7 this year
- Prior to the recession ROA averaged around 0.9
- Book value per share grew from $16.38 in 2009 to $17.53 in 2011
- Earnings took a big hit in 2010 from a huge write-off and the books now show good asset quality
- Institutions hold only about 5% of the stock
- There has been very little insider action on the stock with a few shares purchased.
- Graph shows start of an upward 200 day moving average (IB Brokers graph)
People's United Financial Inc.
Peoples United Financial is full service bank doing business in New England. It has 375 branches in Connecticut, Massachusetts, Vermont, New York, New Hampshire and Maine. At today's closing price of $11.41 PBCT returns around 5.5%.
- Income per share increased from $.15 per share for 1st quarter of 2011 to $.18 per share for 1st quarter of 2012
- Increased the dividend to $.64 per share annually
- 20th consecutive annual dividend increase
- Payout ratio is 107%
- Company repurchased 4.5 million shares during the first quarter with an authorization to purchase 13.5 million more shares
- Announced acquisition of 56 branches in New York from RBS Citizens which is expected to close in the 2nd quarter
- This acquisition would make them exclusive provider for banking services at 139 Stop & Shop stores in New York & Connecticut
Historical data on PBCT (S&P)
- ROA rose from 0.5 in 2009 to 0.8 in 2011
- Prior to the recession ROA was running at about 1.1
- Book value moved downward from $10.68 in 2009 to $8.75 in 2011
- Loss in book value was largely a consequence of buying 3 other banks in 2010 and 2011
- S&P maintains that PBCT will continue to be a buyer of other banks because of its high liquidity
- S&P expects low growth of earnings over the next 2 years with increasing market share in New England
- Graph shows downward momentum with 200 day moving average holding steady on the peaks and valleys (IB Brokers graph)
S&P writes that the fundamental outlook for regional banks over the next 12 months is positive. It maintains that credit quality continues to improve for the group and that net charge offs and nonperforming loans are going down. These regional banks are relatively safe stocks with a better than average dividend. They also have reasonable prospects to make some small capital gains over the next few years as the excesses from the recession recede.
Disclosure: I am long UVSP.