Entering text into the input field will update the search result below

5 Dividend-Growing Regional Bank Stocks To Buy Now

Mar. 02, 2020 11:39 AM ETBHB, CTBI, PB, WASH, WSBC7 Comments


  • Regional banks get pummeled when the yield curve inverts, and right now, the yield curve is strongly inverted.
  • However, the yield curve should un-invert in the coming months.
  • The five regional banks detailed below are based across the country, from Maine and Rhode Island to Kentucky and West Virginia to the Lone Star State of Texas.
  • Their dividend yields range from 2.85% to 4.75%, but each has good dividend safety and growth prospects.

Image Source

The noble community bank has certainly seen better days. Its basic business model is to borrow short for relatively low interest rates and lend long at relatively high interest rates, pocketing the spread. Simple enough, right?

Well, that simple business model is made much harder when the yield curve (the level of various interest rates from short to long duration) flattens or inverts. In the past twelve months, interest rates have flattened to the point of significant inversion twice: once around August 2019, and now again this past week.

It has gotten so bad that even the 30-year Treasury rate is offering almost the same yield as the effective Fed Funds rate (aka the "overnight" rate):

For your humble community bank trying to turn a profit by borrowing (or accepting deposits) short and lending long, this is an extremely undesirable situation. Borrowers are flooding their doors to refinance their loans at lower rates, and meanwhile, they still have to pay the same rates to their depositors and on their own short-term borrowings. Margins are getting squeezed.

Perhaps this is why we've seen five of my favorite high-quality, dividend-paying regional bank stocks get pummeled over the last several months:

The good news is that inverted yield curves tend not to last very long. Economic conditions inevitably shift such that either the short end of the yield curve falls below the long end, or the long end rises above the short end — or both simultaneously. I suspect that in the coming weeks or months, we'll see the short end falling while the long end bounces back up. That should provide some relief for beaten-down regional banks.

In the meantime, we investors now have a marvelous buying opportunity before us! So let's dive into five regional

This article was written by

Austin Rogers profile picture

Austin Rogers is an REIT specialist with a professional background in commercial real estate. He writes about high-quality dividend growth stocks with the goal of generating the safest growing passive income stream possible. Since his ideal holding period is "lifelong," his focus is on portfolio income growth rather than total returns.

Austin is a contributing author for the investing group High Yield Landlord, one of the largest real estate investment communities on Seeking Alpha, with thousands of members. It offers exclusive research on the global REIT sector, multiple real money portfolios, an active chat room, and direct access to the analysts. Learn more.

Analyst’s Disclosure: I am/we are long BHB, WASH, WSBC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I may initiate a long position in CTBI and PB over the next 72 hours.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (7)

The problem with most of the 5 banks you referenced is that the total return, compared to the S&P 500 index, for both one and 3 year time periods has been negative. So why would one invest?
David Van Knapp profile picture
Good valuations. Often the best dividend stocks to buy are ones that have been lagging the market.
Austin Rogers profile picture
What Dave said.
In this age of passive investing and downward spiraling fees, I think you must haircut the value of wealth management segments inside these banks.
Show me wealth management at your humble local bank and I see assets waiting to be seduced away to Vanguard, ETF-land and their ilk.
JonFund profile picture
Have owned Prosperity Bank for about 10 years now. The best regional bank in one of the fastest growing economic regions in the country. A winning combination.
smurf profile picture
What about PACW? Nice dividend. Mostly commercial, downside is California is center of their business. Too many Sanders types there.
OZK (Bank of the Ozarks) might be worth a look as well.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.