Investing in Banks is Boring But Sexy
Fortune Magazine is happy about bank stocks, and it comes down to dividends. The dividends bank stocks pay to their shareholders beat the averages and increase every year, far above the rate of inflation. Presumably banks can offer this because they don’t necessarily need to reinvest earnings in much research and development, like a technology company might.
With increasing dividends and increasing earnings per share, you’re going to be looking at more than a 15% return after seven years. (The details are in the Fortune article.)
The article thankfully also mentions the risks of investing in these stocks, but the author quickly doubles back and writes the chance of single-digit returns is unlikely. The author predicts more acquisitions. Major banks like Citigroup (C), Wachovia (WB), Bank of America (BAC), J.P. Morgan Chase (JPM), and Wells Fargo (WFC) may look to buy regional banks strong in certain locations, SunTrust (STI) and PNC (PNC).