Most financial services stocks slashed dividends during the financial crisis. Is it time to start raising them?
At the peak of the financial crisis, financial services stock Citigroup (C) slashed its dividend repeatedly, down to 0.007%.
As the ramifications of the mortgage crisis worked their way through the financial system, several of the largest banks in country were forced to reduce the amount of money they could pay out to investors. Remaining solvent became a matter of making the numbers align.
Now, more than four years later, many analysts suggest it's time for banks to start raising dividends again. And for companies like Citigroup, whose dividends were cut so much, the growth in yields is expected to be impressive. Citigroup's projected dividend growth for the next three years is more than 216%.
Using data from Bloomberg, we noticed that not one, but all five of the top five highest projections for dividend growth were in the financial services sector.
Now, projected growth isn't always as reliable an indicator as historical growth. And when projections are high it means the stock is more likely to be expensive. However, valuations for many of the big banks are still low, Citigroup for example has a price-to-equity (P/E) ratio of 12.35.
Depending on where you stand regarding their balance sheets, these five financial services stocks could represent a good opportunity for value investors and income investors alike.
Click on the interactive chart below to view dividends yields over time.
Do you see investing opportunities among the stocks with the highest projections for dividend growth this year? Use the list below as a starting point for your own analysis.
1. Citigroup, Inc. (C, Earnings, Analysts, Financials): Provides consumers, corporations, governments, and institutions with a range of financial products and services. Market cap at $148.77B, most recent closing price at $49.33.
Projected three-year dividend growth: 216.65%
2. Regions Financial Corp. (RF, Earnings, Analysts, Financials): Operates as the holding company for the Regions Bank that provides a range of commercial, retail, and mortgage banking services in the United States. Market cap at $14.37B, most recent closing price at $10.55.
Projected three-year dividend growth: 54.67%
3. SunTrust Banks, Inc. (STI, Earnings, Analysts, Financials): Operates as the holding company for SunTrust Bank, which provides various financial services to consumer and corporate customers in the United States. Market cap at $20.29B, most recent closing price at $38.05.
Projected three-year dividend growth: 31.73%
4. Progressive Corp. (PGR, Earnings, Analysts, Financials): Provides personal and commercial automobile insurance, and other specialty property-casualty insurance products. Market cap at $14.00B, most recent closing price at $23.30.
Projected three-year dividend growth: 21.63%
5. Discover Financial Services (DFS, Earnings, Analysts, Financials): Operates as a credit card issuer and electronic payment services company primarily in the United States. Market cap at $25.86B, most recent closing price at $53.88.
Projected three-year dividend growth: 21.28%
(List compiled by James Dennin. Dividend yields sourced from Zacks Investment Research, all other data sourced from Yahoo! Finance.)
Analyze These Ideas: Getting Started
- Read descriptions for all companies mentioned
- Access a performance overview for all stocks in the list
- Compare analyst ratings for the companies mentioned
- Compare analyst ratings to annual returns for stocks mentioned
- Real-Time Opinion: Scan the latest tweets about these companies (feed will open in a new window)
Dig Deeper: Access Company Snapshots, Charts, Filings
- Citigroup, Inc.(C, Chart, Download SEC Filings)
- Regions Financial Corp.(RF, Chart, Download SEC Filings)
- SunTrust Banks, Inc.(STI, Chart, Download SEC Filings)
- Progressive Corp.(PGR, Chart, Download SEC Filings)
- Discover Financial Services(DFS, Chart, Download SEC Filings)
© Kapitall, Inc. All rights reserved. Kapitall Wire is a division of Kapitall, Inc. Kapitall Generation, LLC is a wholly owned subsidiary of Kapitall, Inc.
Kapitall Wire offers free cutting edge investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by Kapitall Inc., and its affiliate companies.
Open a free account today get access to virtual cash portfolios, cutting-edge tools, stock market insights, and a live brokerage platform through our affiliated company, Kapitall Generation, LLC.