Regional bank stocks are having an underwhelming year, but investors who are on the hunt for good dividend payers might find a few gems, according to Piper Sandler. The SPDR S & P Regional Banking ETF (KRE) is off by about 1% in 2024, paling in comparison to the tech-driven 17% surge for the S & P 500 . But don't just focus on the banks' performance — their rich dividends can help boost investors' portfolios.
"Given the recent pullback in bank stock prices, we are finding lots of regional and community bank stocks that have eye-catching dividend yields," wrote Mark Fitzgibbon, managing director at Piper Sandler, in a Thursday report. The firm sought out "banks with dividend yields over five that are poised to thrive." There is more to picking solid dividend stocks than just going by the yield.
That is because a high dividend yield is attractive at first blush, but it may also be an indication that the stock's price has been on a downturn. Investors will need to make sure they pick names that have a history of steady, sustainable payments. Fitzgibbon's team screened the major exchanges for banks that are offering current dividend yields above 5%.
It eliminated banks that had a dividend payout ratio greater than 85%, as well as those with tangible common equity ratios that were less than 7%, figuring companies that are below that threshold may be pressured by regulators to cut their dividends to conserve capital. Piper Sandler further whittled down the list by eliminating com.
