Friday, April 12, 2013

Banking Stocks Continue to Improve

Back in late 2011 I decided it was time to invest in banks again. The affects of the mortgage crisis had finally took a turn for the better and banks' financials were improving. TARP funds were being paid back, lending was opening back up, and most importantly dividend payments were increasing again. I wrote about four bank stocks with future dividend potential, and due to the research from that article I decided to take a chance on PNC Financial Services Group, Inc. (PNC).

Since then, PNC hasn't rewarded me much in price appreciation, but it has rewarded me in dividend increases. Last year PNC gave investors a 14% raise. This past week it increased its dividend payment again by 10%. The new payout gives PNC a yield around 2.7%.

This of course is another positive sign that PNC's financials are strong. Current government regulations prevent banks from raising their dividends unless they are able to pass certain stress tests that were designed to see how well a bank would survive if the economy went through another deep recession.

Within the banking industry I believe PNC is a strong dividend growth prospect and represents a good value at current prices. I'd like to diversify further within the industry and invest in another bank that is showing similar financial strength as PNC. I intend to do some screens in the near future and put together a more detailed analysis of other banking investment options we have. I believe the dividend increases will continue within the industry along with stock price appreciation. The financial sector will likely be the biggest benefactor if the economy continues to improve.

Disclosure: I am long PNC.

Related Articles:

No comments:

Post a Comment