Regions Financial (NYSE:RF) is a midsized regional bank based out of Birmingham, Alabama that has a number of compelling things going for it as a potential investment, but its paltry 1.3% dividend certainly isn't one of them -- though that may be changing.

When you consider the $13 billion bank and a few of its similarly sized regional peers and competitors, you can see it certainly has some catching up to do when it comes to returning capital to shareholders in the form of dividends:


Dividend Yield

Regions Financial






Huntington Bancshares (NASDAQ:HBAN)


KeyCorp (NYSE:KEY)


Source: SNL Financial.

But this hasn't always been the case, as when you consider Regions Financial and its peers in the years leading up to the financial crisis, it was actually among the best when it came to dividend payouts:

Source: Yahoo! Finance.

Shown a little differently, over those 18 quarters, Regions had a rather impressive 3.8% average yield, which placed it only behind KeyCorp:


Average Dividend Yield
Q1 2003-Q2 2007

Regions Financial




M&T Bank


Huntington Bancshares




Source: Yahoo! Finance.

That is rather interesting when you consider that of the five banks mentioned, the two banks that had the highest payout ratios leading up to the crisis now in fact have the lowest ones coming out of it. So, what are investors to think of the prospect of Regions Financial returning to its former income-investor pleasing ways?

One has to look no further than the recent comments made by Regions Financial CFO David Turner at a recent conference when he stated matter of factly:

"We would like to get our dividend closer to -- our payout ratio closer to where our peers are. We would like to use our capital to invest in the business and grow the business... that's what we want to do. To the extent those [opportunities] aren't available, though, we recognize we don't need to keep the capital. We need to return that to the shareholders."

2012 was a year marked by Regions clearing house as it paid back its TARP funds and sold its brokerage business Morgan Keegan to Raymond James. In 2013, the bank narrowed its focus and really attempted to maximize the value of a leaner and simpler business model. It has grown its loans by $2 billion and made tremendous inroads through indirect auto lending and its credit card business.

Regions Financial has delivered continual steady returns, and all signs indicate that it will continue to do so in 2014 and beyond. With a management team committed to returning to its previous shareholder friendly ways, I suspect its dividend will rise sooner rather than later.