Regional Banks Are Undervalued And Have Growing Dividends

In the current market is it is difficult to find value and yield. The two obvious places to look right now are energy and healthcare. But these sectors also have significant risks due to volatile energy prices and regulatory and patent expiration, respectively. However, two recent articles on Seeking Alpha pointed me towards the regional banking sector, which is undervalued and has been largely been ignored since the Great Recession. In one article, the author pointed out that Bank Sector yields are greater than Utility Sector yields for the first time since the Great Recession and this relative difference hit a 25-year high. A second article points out that in general bank valuations are cheap relative to the S&P 500 (SPY). In particular, small and mid-size regional or community banks are relatively undervalued due to a downward trend in stock prices resulting from concerns of a slowing economy and lower rates. But many banks are trading at low valuations and their yields have increased to 3% or more. Some can even be considered dividend growth stocks. I analyze small and mid-size regional banks based on several criteria and risks to the dividend including lower interest rates and credit quality. This list should serve as starting point for further research.

Please read the complete article at my profile on Seeking Alpha.

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