Bank Stocks to Invest in 2017
One of the oldest industries that is still commonly used on a daily basis is the banking sector. And upon researching this sector, you will find many different business models being used within it.
However, as a high dividend investor, many finance stocks and their business models may not satisfy your income needs. And the companies that do will still require research to determine if their dividends are sustainable. This is why it is important to take the time to understand a company and not just make an investment based on the yield being offered.
There are many factors to consider. One example would be President Donald Trump, who wants to create more of a free market, with fewer rules and regulations. This would be great for companies that operate in the U.S., as well as high-dividend bank stock investors, because there will be less regulatory costs.
Another example would be the recent interest rate hikes by the Federal Reserve. Again companies operating in the U.S. should see their margins improve. This relates to the net interest margins, which are the difference between an interest rate charged on a loan and a rate being paid out on a savings account. Improved margins should keep high-dividend bank stock payments steady, if not raise them over time, due to the positive impact on financial statements.
Below, you will find my 10 best bank stocks that should be considered for ownership. All the companies mentioned below have all or part of their business operations in the U.S., and will therefore benefit from the above factors.
High Dividend-Paying Bank Stocks
| Company Name | Symbol | Price | Dividend Yield |
| New York Community Bancorp, Inc. | NYCB | $15.31 | 4.44% |
| HSBC Holdings plc (ADR) | HSBC | $44.01 | 5.8% |
| Citizens & Northern Corporation | CZNC | $24.30 | 4.28% |
| Oritani Financial Corp. | ORIT | $17.20 | 4.07% |
| Greenhill & Co., Inc. | GHL | $30.35 | 5.93% |
| BGC Partners, Inc. | BGCP | $11.80 | 5.43% |
| FBR & Co | FBRC | $16.15 | 4.95% |
| Credit Suisse Group AG (ADR) | CS | $15.30 | 4.7% |
| Westpac Banking Corp (ADR) | WBK | $25.83 | 5.34% |
| Banco Santander, S.A. (ADR) | SAN | $5.54 | 4.18% |
1. New York Community Bancorp, Inc.
New York Community Bancorp, Inc. (NYSE:NYCB) has been in business for more than 80 years and has more than 225 branches across five states. Its business is divided into two different segments: banking operations and residential mortgage banking.
Both parts of the business go hand and hand. Banking operations brings money into the bank with such products as bank accounts, certificates of deposit (CDs), and money market products. This money is then lent out in the form of a mortgage. This is a very simple business model, and going forward, the company should see an expansion in its margins and benefit from an increase in interest rates.
Investors have two ways by which they can see part of these growing margins. The first is stock price appreciation due to increase in the earnings that are generated from business operations, while the second is an increase in the quarterly dividend that is paid out to shareholders.
2. HSBC Holdings plc (ADR)
HSBC Holdings plc (ADR) (NYSE:HSBC) stock is a company that has a presence globally and business operations in many different business segments, such as retail banking, wealth management, and global banking and markets (GB&M). At this time, HSBC stock is trading at $44.01 and offering a yield of 5.8%. The dividend is paid on a quarterly basis and has remained at $0.50 for many years.
One focus for the company, based on its financial statements, is reducing the overall cost of operating the business. This would include decreasing both the overall headcount of employees and the number of branches.
There may not be an immediate benefit in the short term because employees may be paid a severance package, not to mention the costs associated with closing numerous locations. However, once these costs are addressed, we should see positive results.
Another potential impact dividend growth is the GB&M division, which has seen double-digit growth over the past few years. The margins from this part of the business are some of the largest within the bank and the fees on a per-transaction basis are quite high as well. This is because a lot of time and money is saved by the focus on larger client transactions on behalf of government agencies, institutional clients, and individuals with a high net worth.
3. Citizens & Northern Corporation
Citizens & Northern Corporation (NASDAQ:CZNC) stock is a regional bank, only operating in Pennsylvania and New York. Even though CZNC stock is a small-cap stock, it is not one to ignore, thanks to its over-150-year history.
CZNC stock would also be classified as a high-dividend financial stock, given its current dividend yield of 4.28% and trading price of $24.30.
One reason CZNC is one of the best bank stocks, is due to its shareholder-friendly status, as seen from the 79% increase in the dividend payment since 2011.
Going forward, there is the possibility of additional dividend growth. I say this because of CZNC stock’s payout ratio of 59%. This ratio means that for each dollar of earnings generated, $0.59 is paid via the dividend. The remaining earnings are reinvested into the business.
4. Oritani Financial Corp.
Oritani Financial Corp. (NASDAQ:ORIT) is a company with a history of more than 100 years. Operating in the Pennsylvania and New York State areas, you may not be familiar with the company. However, its history shows that shareholders have been rewarded.
Year after year, the business’ assets grow. This would include all areas within the business, be it loan growth, deposits, or the bottom line of the balance sheet. And shareholders have still been rewarded, both through a regular quarterly dividend and additional special dividends, the latter having been paid out for five consecutive years.
Share repurchases have also occurred, reducing the overall number of outstanding shares. As a result, shareholders own a larger percentage of the company, as fewer shares means the remaining ones are worth more of the company. The treatment of shareholders is very important for Oritani Financial, as they account for 15% ownership of ORIT stock as of the end of 2016. (Source: “Investor Information,” Oritani Financial Corp, December 31, 2015.)
5. Greenhill & Co., Inc.
Greenhill & Co., Inc. (NYSE:GHL) stock is an investment bank which is based in the U.S. but operates globally. Offices are located in the U.S., the United Kingdom, Germany, and Japan.
Greenhill sees a lot of repeat business from companies that are considered global players, such as GlaxoSmithKline plc (ADR) (NYSE:GSK) and Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA). There is no company that accounts for more than 10% of Greenhill’s overall business, which helps to diversify the revenue generated. (Source: “November Update,” Greenhill & Co., Inc., February 7, 2017.)
A high-dividend financial stock, the concern with GHL stock is if the dividend is sustainable. However, note that there have been no cases of a dividend being missed or cut, including during the most recent recession in 2008.
Another reason to consider GHL stock would be its current valuation, which is quite appealing. The stock is presently trading at a price-to-earnings (P/E) multiple of 15.8 times, below that of the S&P 500, which has a multiple of 26.3 times.
One reason for this appealing valuation is the company’s lack of recognition. Many investors may be missing out this great high-dividend stock because the last reported revenue saw growth in the double-digits. This could be an opportunity to get paid to wait for the market to recognize GHL stock’s investment value.
6. BGC Partners, Inc.
BGC Partners, Inc. (NASDAQ:BGCP) is a company that is based from the U.S. with a global presence, with operations in financial and real estate services.
BGCP stock would be classified as both a high-dividend financial stock and a dividend growth stock. It currently offers a dividend yield of 5.43%, given the $11.80 trading price. The dividend has seen growth of 33% over the past two years, with further growth possible because approximately two-thirds of earnings are paid out via the dividend. This provides flexibility to increase the dividend without harming management’s ability to invest into the business.
Another method used to reward shareholders is share buybacks. Share repurchases depict management’s belief that the current share price is undervalued. Even though the shares are trading at a five-year high, they apparently believe there is more upside to look forward to.
7. FBR & Co
FBR & Co (NASDAQ:FBRC) is a unique small-cap company that helps companies move from being private to public via initial public and private offerings.
Over the past few years, FBR’s management has been focusing on making the company leaner and stronger, reducing the number of both employees and offices. This is a great long term benefit to shareholders and this took a few years to happen and this in turn has rewarded shareholders. Shareholders have been rewarded with a quarterly dividend since 2015.
FBRC stock is currently yielding 4.95%, based on the current market price of $16.15.
8. Credit Suisse Group AG (ADR)
Credit Suisse Group AG (ADR) (NYSE:CS) stock is a global company that provides numerous financial services and products.
CS pays a dividend on annual basis and, when there is cash available, provides a special dividend as well. Additional special dividends are possible for two reasons. First, there is a plan to spin out the Swiss business, which would raise a large amount of capital. This would be done via an initial public offering, which is expected to be completed towards the end of 2017.
The other reason is because of the cost cutting that is occurring across the business. Besides cutting the number of employees, poor-performing divisions could be sold off as well, which could result in a sudden burst of capital. Credit Suisse being focused on the high-growth areas of the business would benefit the financial statements positively as well.
9. Westpac Banking Corp (ADR)
Westpac Banking Corp (ADR) (NYSE:WBK) stock is a banking organization that provides a wide range of services, including consumer banking, wealth management services, and investment portfolio management and advice.
WBK stock is currently priced at $25.83, based on a dividend yield is 5.34%. The dividend is paid on a semi-annual basis. Special dividend payment have also occurred over the course of the company’s history. This is possible because Westpac generates high profit margins that are above the industry average.
10. Banco Santander S.A. (ADR)
Banco Santander S.A. (ADR) (NYSE:SAN) stock is a large-cap company, operating in retail and commercial banking. The bank has locations in the U.S., Europe, and Latin America.
Since 2014, SAN stock is down approximately 50%. SAN stock is also trading at a cheap valuation compared to the overall index. This is based on its current P/E ratio of 12.6 times, compared to the previously noted 26.3 of the the S&P 500.
In order for the P/E ratio to see a boost, earnings need to grow. At this time, management is trying to accomplish this through cost-cutting and investing in areas that are seeing higher rates of growth. An example would be moving away from brick-and-mortar branch locations and providing customers more access to digital banking. On a long-term basis, this should be reflected in the company’s net income.
Another area that could boost the P/E ratio is the growth in outstanding loans. The U.S. has seen a rise in the benchmark rate, which means expansion of the margins within the bank and potential reinvestment into other areas of the business. This could result in the dividend seeing an increase over time as well. Meanwhile, until these positive events are realized, a dividend yield of 4.18% is earned.