There are a lot of reasons to gravitate toward regional bank stocks, one of which is the fact that the best ones tend to distribute a majority of their earnings every year to shareholders. This is particularly great for dividend investors, such as retirees looking to supplement their fixed incomes.
At the same time, when it comes to returning capital, a bank's dividend tells only half the story. The other half revolves around share buybacks -- the repurchase and retirement of outstanding shares of common stock by a bank in order to concentrate ownership around remaining shareholders.
With this in mind, I ran a screen of the nation's biggest regional bank stocks to see which of them returned the most capital through a combination of dividends and buybacks. You can see the top five in the chart below, which is dominated by U.S. Bancorp (USB 0.70%), Capital One Financial (COF -0.22%), and PNC Financial (PNC 1.02%).
It's not overly surprising that U.S. Bancorp, Capital One Finance, and PNC Financial sit atop their peer group when it comes to the amount of capital that they return to shareholders. These are, after all, the largest regional banks measured by the size of their respective balance sheets.
U.S. Bancorp is the largest, with $438 billion in assets, according to data from YCharts.com. PNC Financial ranks second at $361 billion. And Capital One Financial brings up the rear, at $339 billion. To put this in perspective, the next largest regional bank, SunTrust Banks, has less than $200 billion worth of assets on its balance sheet.
Yet, while size is an important reason that these three banks are able to pay out so much to shareholders each year, it's not the only reason. Indeed, they have also been among the best-run banks over the past decade, thanks largely to their performances through the financial crisis.
By sidestepping the worst of the subprime mortgage bubble in the lead-up to the crisis, all three of these banks not only survived the downturn, but have thrived as a result of it:
- U.S. Bancorp consolidated its position as the most profitable major bank in the country, with an industry-leading 14.4% return on equity over the past 12 months.
- PNC nearly quadrupled in size over the past decade, thanks in no small part to its acquisition of National City Corporation at the trough of the 2008 crisis.
- And Capital One has continued its unprecedented journey from a monoline credit-card lender to a full-fledged regional bank.
While many of their competitors have thus had to retreat and retrench over the last few years, hoarding capital instead of distributing it, all three of these banks have been able to grow their earnings, as well as the amount of capital that they return to shareholders via dividends and buybacks.
The net result is that, if you're looking for regional bank stocks that pay out a hefty chunk of change each year, you could do a lot worse than U.S. Bancorp, PNC Financial, and Capital One Financial.