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Irish Eyes Frowning

As if to prove that financial scandal is indeed a global sport, over the weekend two of Ireland's premier banks dunked themselves in enough hot water to boil a potato.

Saturday, the CEO of Bank of Ireland (NYSE: IRE  ) resigned for accessing porn with his office PC. The same day former Allied Irish Banks (NYSE: AIB  ) chief Tom Mulcahy resigned the chairmanship of airline Aer Lingus over accusations of tax issues. Then, yesterday, a newspaper editorial revealed that seven former and three current AIB executives may have been guilty of tax evasion. AIB has also recently been accused of gouging clients, and in 2000, paid more than 100 million euros for its part in a massive tax evasion scandal. AIB was among those accused of aiding businesses and individuals in dodging the taxman for more than a decade, according to a Reuters report.

The AIB scandal appears to me nearly as bad as the mutual fund malaise here at home. That's too bad. Because as Motley Fool Income Investor chief analyst Mathew Emmert pointed out earlier this year, AIB appears financially stable, and was providing generous returns to investors before a big sell-off in February. To date, AIB has returned roughly 11% with dividends reinvested since it was recommended to Motley Fool Select, now Motley Fool Hidden Gems, subscribers in March of last year.

Bank of Ireland hits a little more close to home for me. I've had the stock on my watch list for its cheap valuation and sterling dividend. Indeed, a quick check this morning shows Bank of Ireland's common shares yielding 5.23%, more than two and a half times that of the S&P 500 market index. Estimates of the bank's earnings growth rate are also discounted more than 25% from its forward price-to-earnings ratio.

We've written here before that measuring management should be a key part of your stock investing. I think it's clear that AIB's problems go deep enough for you to avoid it for now. But what about Bank of Ireland? Certainly the former CEO's personal improprieties are embarrassing, but do they indicate a deep flaw in the business? I don't think so. In fact, his indiscretion might have created a buying opportunity had not bargain hunters been waiting in the wings this morning, sending the shares higher by nearly 3% already.

The lesson? Seamy as it may sound, the sometimes-ugly truth of the stock market is that manyvalue-driven investors profit from all kinds of bad news. So today, as Irish eyes are frowning, someone, somewhere is smiling.

Want to learn about other income-producing investments? Take a free, 30-day trial toMotley Fool Income Investor.

Fool contributor Tim Beyers, like most everyone else it seems, is descended from Irish ancestors. He owns no interest in any of the companies mentioned, and you can view his Fool profile here.

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