**Today we have a guest post from Angry Retail Banker! Check his website out, he’s got a ton of great info.**
I’m here on invitation today to talk to you guys about 5 dividend-paying bank stocks that you’ve never heard of. If you’ve been learning how to buy stocks in Canada, no doubt the financial sector has come up on your radar. That is because the bulk of our index is made up of it!
The banking industry is an interesting one. One of the cornerstones of modern civilization, banking has changed greatly since the days of the Knights Templar transporting and securing deposits of gold during the Crusades. A very ubiquitous but very highly regulated industry, banking is changing faster than ever now that technology is coming to the forefront of finance.
But the basics do not change. People need a way to store, move, and borrow money, and it’s the banks that have always been expected to provide these financial services. After hundreds and hundreds of years, this simple fact has not changed.
The banking sector, as a whole, is a good investment for these reasons. In my opinion, at least. I like investing in companies whose products and services are necessary and ubiquitous. You’ll be seeing a lot more utility and transportation stocks in my portfolio than casino and luxury restaurant stocks. And I feel bank stocks should make up a portion of any stock portfolio dedicated towards long term investing (how much of a portion is up to you, naturally).
Now it’s easy to talk about the big American, Canadian, and British banks that everyone’s heard of, such as JP Morgan Chase, Toronto Dominion, and HSBC. Here, watch this:
“Chase, TD, and HSBC are banks.”
See!? Absolutely amazing.
But I endeavor to go beyond that. What’s the point of telling you that Citibank stock still exists? Where’s the fun in that?
No, instead I’d rather take a look at some of the lesser known financial institutions out there.
Now before I go on, I want to point out that these aren’t recommendations to buy, sell, or hold. I’m not going to gush about the dividend paying power and history of Canadian bank stocks. Speaking of which, I’m American and I’m going to be keeping my focus down here in the US where the guns are cheap and the health care is unaffordable.
The purpose of this article is for those of you who have all or most of the big banks in your portfolio and want to diversify into something a little bit different. Something a bit smaller and more local, with more growth potential than a multinational megabank. And, if you subscribe to the same investment philosophy as me, something that pays a dividend.
So come with me down the rabbit hole of financial hipsterism as we look at 5 dividend-paying bank stocks you’ve never heard of.
Stock #1: Trustco Bank Corp NY
First formed in 1902 in Schenectady, New York and spending most of its history as Schenectady Trust Company, Trustco Bank Corp NY trades on the Nasdaq with the stock ticker TRST.
Trustco Bank has a dividend history that’s almost Canadian. Like Royal Bank, Scotiabank, and all the rest, Trusco has paid uninterrupted dividends since 1904. That puts most of its larger American counterparts to shame.
After many years of operations and acquisitions of much smaller banks, Trustco now operates a network of 145 branches in New York, New Jersey, Massachusetts, Vermont, and Florida. It’s website advertises, in addition to the normal personal and commercial banking and lending services, stuff like trust and estate administration. I’ve never seen a bank offer that sort of thing outside its private banking clients. It could be the case with Trustco as well, but their website seems to indicate that these services are for everybody.
Along with being profitable throughout its entire history (including the Great Depression and Great Recession) and being named by SNL Financial as the 12th strongest savings bank in the country, Trustco Bank stock boasts an $857 million market cap, a P/E ratio of 19.87, and a dividend yield of 3.03% at the time of this writing.
Stock # 2: Park National Corporation
Formed in 1908 and headquartered in Newark, Ohio, Park National Corporation trades on the NYSE American (formerly the American Stock Exchange) under the ticker PRK.
Park National Bank comes off as a small bank that would only have one or two branches, but don’t be fooled. They serve a lot of areas under a number of affiliate banks. They maintain a strong presence with 108 branches in Ohio and Northern Kentucky. Small banking operations that are barely holding on usually don’t boast having 11 community banks and two specialty finance divisions (including an airplane financing division) under their corporate umbrella. Just sayin’.
And they’re about to complete an acquisition. As of this writing, they are merging with a small bank located in North Carolina called NewDominion Bank, which currently trades OTC. The merger is scheduled to close on July 1st, 2018.
Park National’s dividend is a bit of a mixed bag. They have a decades-long track record of paying a quarterly dividend without ever skipping a beat. But where they had once been raising the dividend reliably, the payouts have stagnated since the economy tanked in 2008. Still, while some major banks were eliminating dividends and being bailed out by the government, the fact that Park kept a stable dividend shows the strength of its business.
Quick funny story about my experience researching this company: I almost left this one off the list because I started to think this was PNC Bank (a bank you probably have heard of). When I looked up their stock ticker on Yahoo Finance, all the articles had the same picture of a PNC branch. And the acronym for Park National Corporation is PNC. I had to double check to make sure that they weren’t the same bank.
The company has a market cap of $1.75 billion, a P/E ratio of 18.56, and a dividend yield of 3.26% at the time of this writing.
Stock #3: Parke Bancorp Inc
I guess we can’t get enough of parks.
A much younger bank than the other two I’ve written about, Parke Bancorp Inc was founded in 1999, is based in Washington Township, New Jersey, and trades on the Nasdaq under the ticker PKBK.
Growth investors recognize the need to start small. And people romanticize the small “mom and pop” local community banks over the big impersonal megabanks. Both of those, admittedly, might have been my motivation for writing an article about banks you’ve never heard of. Parke Bank is as small as a bank can get, with only seven branches and 70 full time employees, all spread out through a few townships in New Jersey and two branches in Philadelphia.
Being such a young bank, its dividend history isn’t very impressive compared to the long running dividend streaks that Canadian banks like Scotiabank have given out. But they still pay a dividend. They started in 2014 and have raised it quite liberally every year since. Every dividend growth streak has to start somewhere.
Parke Bank is a small bank, it’s a young bank, and it has a very short dividend history. An investment here today could show much more powerful returns over the long run than Chase or Citibank if the company can grow reliably over the years. And it has plenty of room to grow. But it’s also a lot riskier than Chase or Citibank.
The company has a $207 million market cap, a P/E ratio of 17.41, and a dividend yield of 1.93% at the time of this writing.
Stock #4: Cathay General Bancorp
Formed in 1962 in Los Angeles, California, Cathay General Bancorp trades on the Nasdaq under the ticker CATY. It was formed the same year that the comic book readers of America were introduced to the character of Spider-Man. Just an interesting bit of trivia for you banking and comic nerds out there.
Anyways, Cathay Bank is the oldest Chinese-American commercial bank in the United States, first setting up shop in LA’s Chinatown neighborhood. Throughout its early history, it relied on an influx of Asian immigration to fuel growth. Later, it began acquiring smaller banks as if they were Chase or something, adding their assets and market share to their own.
In fact, in 2007, they even opened a branch in Hong Kong.
The bank maintains 66 branches globally. With the exception of the lone Hong Kong branch, Cathay Bank’s footprint is strictly American, with branches in California, New York, Illinois, Washington, Maryland, Massachusetts, New Jersey, and Nevada.
It does have decades of dividend payments in its history, but unfortunately had cut its dividends at various points in its history, usually coinciding with major stock market corrections. In 2008, it slashed its dividend all the way to a penny per share per quarter and kept it there until a meteoric rise in the last couple of years. Still, it was an American bank that paid a dividend at a time where American banks were dropping like flies.
The company has a market cap of $3.5 billion, a P/E ratio of 18.33, and a dividend yield of 2.25% at the time of this writing.
Stock #5: Southside Bancshares Inc
Formed in 1960 and headquartered in Tyler, Texas, Southside Bancshares Inc. trades on the Nasdaq under the ticker SBSI.
At first glance, there may not be much to say about Southside Bank. It’s a small, single-state bank that operates 59 branches throughout the state of Texas. Kind of gives you that warm fuzzy community bank feel. They’ve also gone through a recent rebranding, with a new logo for that more modernized look.
But what makes Southside Bank interesting is its dividend. Specifically its stock dividend.
No, not it’s stock’s dividend. It’s stock dividend.
For those of you who are ready to turn this into an Abbott and Costello skit, understand what I’m saying. Southside offers its shareholders both a “cash dividend” and a “stock dividend”.
A cash dividend is a normal dividend paid out in cash. Your entire dividend stock portfolio is paying you cash dividends. When you think of “dividends”, you are thinking of this.
Stock dividends, however, pay you a dividend in stock shares rather than cash. They will take the number of shares you have and add a percentage of that number to your share count. So if you have 100 shares and the stock pays a 5% stock dividend, that means that you will suddenly have 105 shares of the stock.
Coincidentally, Southside paid an annual 5% stock dividend for many years until just recently. They cut that stock dividend to 2.5%. But that is on top of a growing cash dividend.
The company has a market cap of $1.19 billion, a P/E ratio of 19.25, and a cash dividend yield of 3.56% (on top of the aforementioned 2.5% stock dividend) at the time of this writing.
Again, it should be noted that none of these are recommendations to buy, hold, or sell. I’m not a licensed investment advisor.
But I bring these 5 dividend-paying bank stocks that you’ve never heard of to your attention for that reason; because you’ve never heard of them.
Your best bet is to always invest in the largest, most profitable companies out there. They are the safest and the surest, but they are also very large and in saturated markets. The huge growth ended decades ago. And when the company doesn’t grow, neither does your investment.
But when you have smaller companies in only a few markets, that means that there is room to grow. Be it through secular growth, being absorbed by a larger competitor, or by buying out even smaller competitors, the growth potential of Parke Bank is much higher than that of Citibank.
Of course, this is the reason why many penny stock traders will tell you to trade their risky ideas, but I do think that there exists a solid middle ground between “stodgy old blue chip” and “risky penny stock that will tank tomorrow” that should certainly be explored once you build a base of solid blue chip investments.
Plus, I think it’s just fun to read up on smaller companies that you’ve never heard of. Maybe I can one day transfer to one of these banks where I won’t be falsely accused of opening dummy accounts by my manager, but that’s another conversation for another blog (namely my own). In an industry that’s dominated by the same multinational names that appear over and over again, to look at a small dividend paying community bank can be a welcome change. Especially when community banks and credit unions are more likely to refinance student loans at better rates, which is a major thing here in the States where we’ve gotten ourselves into a major student debt crisis.
Perhaps one of these small dividend paying banks will be in your portfolio soon!