5 regionals to bank on for high yields
These regional banks scored best in a screen for performance and yield.
Over 400 banks and thrifts have failed since the beginning of 2008, following the housing bubble burst. And many once-stable dividends disappeared in the blink of an eye.
The banking sector has been slow to recover. For instance, the Financial Select Sector SPDR (XLF), which tracks an index of some of the largest U.S. financial institutions, is still roughly 60% below its price five years ago.
That being said, some positive signs are emerging from the banking sector, particularly among the regional banks.
Regional banks, as measured by the S&P Regional Banking SPDR ETF (KRE), have started to outperform the bigger financial institutions. And in the past year, the index was able to catch up with the Standard & Poor's 500 Index ($INX).
Why the rebound in this banking niche?
Regional banks aren't facing the same kind of legal issues associated with the mortgage industry like their larger peers.
And some large financial institutions have decreasing revenue streams because they have had to terminate their in-house trading operations -- something regional banks never had.
Granted, it is still a challenging environment. Regional banks aren't making as much on their customer deposits due to the low interest rate environment. And some regional banks are still contending with non-performing mortgage and business loans.
Stable and improving equity prices are a good sign. But it takes more than that to meet our criteria.
I specifically look for securities that yield 5% or more. With this in mind, I conducted a screen of regional banks with a market capitalization of greater than $500 million and a dividend yield above 5%.
Here are the top five banks based on my screen:
New York Community Bancorp (NYB) -- yielding 8%
First Financial Bancorp (FFBC) -- yielding 7%
Astoria Financial (AF) -- yielding 6%
Valley National Bancorp (VLY) -- yielding 5.6%
Park National Corp. (PRK) -- yielding 5.3%
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The offering could become the second-biggest this year if underwriters exercise an option to buy more shares.
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