As an investor, it doesn't pay to follow the crowd.
In this series, though, we highlight a possible exception -- the collective wisdom of our CAPS community. Read the next section if you're unfamiliar with our methodology. Skip it if you want to go straight to the results.
Why this crowd is different
Jumping into a stock because your rich neighbor did, or because you heard about it from your friend's uncle who used to work on Wall Street, or because CNBC has been talking about it nonstop is a recipe for disaster.
If there's one thing I've learned as a stock analyst, it's that any stock can be gussied up to sound like a world-beater. If there's a second thing I've learned, it's that being a smart person doesn't make you a good investor.
In the hands of a smart person with good communication skills, the never-were and never-will-be stocks sound like tickets to instant fortune. The ancient Greek philosophers made the distinction between rhetoric and knowledge. The former is convincing; the latter is true.
That's why we factor in track record in our Motley Fool CAPS community. We invite everyone to give stocks an outperform (akin to a "buy" call) or underperform rating (akin to a "sell" call) in CAPS. We then use those opinions to calculate a rating for each stock -- from one to five stars (five being the best). But -- and this is a big distinction -- we give more weight to the opinions of folks whose picks have performed well in the past.
The 7 most popular bank dividend stocks
So, with that methodology as prelude, I present to you the seven four- and five-star-rated bank stocks that yield at least 3% and that have garnered the most outperform ratings by CAPS members. I used a minimum market capitalization of $100 million and the proviso that they must be listed on a major U.S. exchange. Remember, stocks are rated on a five-star scale by our CAPS community, so four- and five-star stocks are consensus outperforms.
|
Company Name
|
Market Capitalization
(in millions)
|
P/E Ratio
|
P/B Ratio
|
Dividend Yield
|
CAPS Rating
(out of 5)
|
Outperform Picks
|
|
Banco Santander (NYSE: STD )
|
$96,197
|
8.3
|
1.1
|
4.8%
|
****
|
753
|
|
Royal Bank of Canada (NYSE: RY )
|
$68,069
|
13.9
|
2.1
|
3.9%
|
****
|
540
|
|
Bank of Nova Scotia (NYSE: BNS )
|
$49,818
|
14
|
2.3
|
3.8%
|
****
|
531
|
|
Toronto-Dominion Bank (NYSE: TD )
|
$58,612
|
15.1
|
1.7
|
3.4%
|
****
|
414
|
|
Banco Latinoamericano de Exportaciones (NYSE: BLX )
|
$350
|
11.8
|
0.7
|
4.7%
|
*****
|
334
|
|
New York Community Bancorp (NYSE: NYB )
|
$6,921
|
12.1
|
1.3
|
6.3%
|
****
|
227
|
|
Bank of Hawaii (NYSE: BOH )
|
$2,156
|
12.2
|
2.1
|
4%
|
****
|
108
|
Source: Motley Fool CAPS. NM= not meaningful.
I do think there's opportunity in banks today. Especially the smaller ones. Bank of Hawaii is on my radar, but I've found it too expensive so far. It has a price-to-book ratio of 2.1. I start salivating under 1.0.
However, five foreign banks (including three Canadians) lead this list. Banco Santander looks good by the numbers, but you also have to factor in the Spain-specific risk (For more on the possible opportunity, read this). As for the Canadians, like Bank of Hawaii, the perceived quality is at least partially priced in (For more on Canadian banking, click here).
More CAPS members think Banco Santander is an outperform than any other highly rated dividend stock in banking. Which is your favorite? Make your thoughts known in CAPS by clicking here. Or just go there to do further research on one of these stocks.
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