BB&T Corp: The Best House in a Bad Neighborhood

Today BB&T (BBT) reported that it still expects to increase its 46 cent per share quarterly dividend. The bank has raised its dividend for 36 straight years, according to Reuters.

This stock has declined precipitously as the regional banks have been pummeled.  BBT has lost 33% of its value since the beginning of May. While the company has exposure to Florida, one of the worst markets hit by the housing debacle, its capital position remains strong and its earnings record is excellent.

Unlike its peers, BBT has not taken dramatic write-downs on its portfolios. BBT has the problem of being the best house in a bad neighborhood. With a yield of 7% right now, I am sticking with BBT despite the recent slide which seems unwarranted.

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of BBT --- although positions can change at any time.

Comments

[Darrell]

The question is: how will BB&T assets fare in an inflationary economic environment? With interest rates on saving accounts below asset rate of return, BB&T earns a profit. What if the reverse occurs?

[Alpha Seeker]

Hm, is this an article or a joke? If people like you are called financial journalists then George Soros is definitely a new NBA star.

[BlueOkie]

BBT is also my financial of choice. Are there better choices in finance?

[muley101]

These down-beaten bank stocks are a day traders dream, especially with the energy crisis churning the market. I am making a killing day trading WAMU, KEY, FITB, BBT, and WB. I wouldn't jump into them long overnight yet though, until the energy crisis gets sorted out which may take a very long time, I hope.

[helplessobserver]

BB&T stock price has been halved, but I do not think their earnings will take the same haircut. I will bet the dividend will be raised by 2 to 4 cents. Once the market sees this well run bank is a winner the stock will be bid up into the 30s.

[gaucho]

Wow where is the analysis? I give opinions also, and my opinion is that you should NOT give anyone financial advice. Your Kool-Aid analysis is all sweet empty calories. BB&T will see ever rising loan failures. We are just in the third inning of the end game for many of these banks. BB&T has exposure to toxic waste which they should never have had.

[uncliggett]

I don't understand how this is a thesis for owning the stock At least tell us how well housing is holding up in North Carolina. Or tell us how this bank has no housing construction loans, or how this bank never wrote a bad mortgage. Unfortunately, I think the fact that they haven't taken a write down may be more of a negative than a positive. Dividend yields are pretty meaningless for predicting future returns of a stock. I could buy a jumbo mortgage right now for 7% of a guy who has never missed a payment on a bill in his life. Or a municipal bond that pays me 7% on a hospital sitting next the largest oil well in the US. That hospital isn't 20:1 leveraged either. Hopefully, investors understand that dividend yields don't point to the future profitability of a company. They only show you what happened in the past. Life will be much tougher for banks in the future. Don't count those dividends until they hatch.

[hendi_alex]

Housing is pretty slow in NC, especially in some of the metropolitan areas like around Charlotte. On the other hand, home prices didn't escalate in most areas of NC like they did in the hot spots. So IMO homes are not likely to deflate in value the way they are in CA, FL, and some other states. I recently helped my daughter search for a home in the triad area, so many houses are valued in the $120K-$240K range and those will likely stay fairly steady in price. Also in the process of renovating the repo that she bought in the Greensboro area, Home Depot and Lowes have had a brisk business most every trip no matter what day of the week we shopped. Anyway, just info from casual observation, but it would appear to me that BBT would not have the degree of exposure like other banks that conduct business in the hot spots have. That said, BBTs exposure to commercial projects and to speculative home builders will likely keep a damper on earnings for some time to come. I'm building a long term position in BBT and am placing my bet that in late 2010 or earlier, I'll be smiling at those accumulated shares. I'm also long USB and IAT. Initially bought USB several months ago near its low, and began building a position in BBT and IAT just a few weeks ago. USB is in the green, BBT and IAT are in the red, all but the most recent incremental buys.