US Bancorp (NYSE:USB) had a great story to tell at the recent Goldman Sachs Financial Services conference. Investors who like steady returns and high dividends should pay close attention.

A quick primer
US Bancorp, which recently named Richard Davis as its new CEO, is currently the sixth-largest bank in the U.S., with 13.6 million customers, $217 billion in assets, and a 4.5% dividend yield. The company aims for 10% earnings-per-share growth and a 20% return on equity, and it boasts a shareholder-friendly policy of returning 80% of income to investors through dividends and buybacks.

Raising the bar
What really makes US Bancorp -- a Motley Fool Income Investor pick -- a gem of a bank is its low efficiency ratio. Thanks to its success in selling a broad array of services, US Bancorp gets about one-third of its revenues from wealth-management and payment-processing services, and about one-half of its sales from fee income-the bank earns fee income whenever you use one its debit cards, or if you overdraft on a checking account. Unlike a bank's core spread lending revenue (where it derives income from the spread between the interest it pays to depositors, and the interest it earns by loaning out those deposits), fee income is less capital-intensive, and uncorrelated to unpredictable interest rates.

Thanks to this high percentage of fee income sales, US Bancorp's efficiency ratio is the best among its peer group, at 44.7%. That's lower than Bank of America's (NYSE:BAC) 47.8%, Wells Fargo's (NYSE:WFC) 58%, and WashingtonMutual's (NYSE:WM) 60.1% efficiency ratio as of the latest quarter. Keep in mind, the efficiency ratio is dependent on a bank's sales mix, so it's not a perfect basis for an apples-to-apples comparison.

Digging a moat
According to Davis, the company's main competitive advantages are its low-cost provider status and its diverse sales mix. The more services a customer uses, the less likely the customer is to leave. Thus, US Bancorp pays its depositors lower rates. Despite being in the bottom third in average payments, US Bancorp has grown net checking deposits 6%-8% annually over the last decade. This results in higher-quality deposits and prevents the company from attracting "hot money" -- customers who simply chase yield and tend to be less profitable.

The company's low-cost funding base allows it to lend out at more competitive rates, using "commodity" services such as lines of credit as a beachhead to attract lucrative future business. For example, Davis mentioned that if the market spread for a line of credit were 110 basis points over LIBOR, US Bancorp might undercut the competition and offer 80 basis points. Once US Bancorp has a relationship with a customer, it can compete much more effectively for higher-end payment processing and asset management services, as well as other types of lucrative fee-based income.

Because many of its competitors don't offer as diverse an array of services, they aren't as competitive on the commodity products. US Bancorp has been very successful implementing this strategy, and the results speak for themselves. The company only trails American Express (NYSE:AXP) in corporate credit card issuance, and its 2.24% return on assets is scintillating. (In general, anything more than 1% is considered decent.)

Over the past five years, US Bancorp's stock has returned an average 16% annually. Although the company's trailing P/E ratio of 14 isn't cheap compared to other big banks, in the long term, the stock looks poised to continue providing market-beating returns.

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US Bancorp, Washington Mutual, and Bank of America are Motley Fool Income Investor recommendations. Discover more of the Fool's picks for the market's top dividend dynamos with a free 30-day trial.

Fool contributor Emil Lee is an analyst and a disciple of value investing. He doesn't own shares in any of the companies mentioned above. Emil appreciates comments, concerns, and complaints. The Motley Fool has a disclosure policy.