Top Shelf Financial Stocks?

[Kerim]

I'm curious which financials you all consider worthy of a conservative dividend growth portfolio. The three that I own are AFL, WFC, and BEN. Together, they make up less than 5 percent of my DG portfolio. I don't think I'd let the sector ever get too large for me -- too much worry about the occasional implosion. But I am considering buying another medium-sized pile of BEN.

Thoughts?

[EricL]

T. Rowe Price (TROW), BlackRock (BLK) and Ameriprise Financial (AMP) all performed fairly well during the last recession and have good balance sheets/credit ratings. I am long AMP of the three, but wouldn't have a problem with any of them in my porfolio.

I own Wells Fargo (WFC) for my only bank as I think they are the most conservatively run of the mega U.S. banks.

[navyasw02]

I'm woefully lacking on financials so I picked up WFC on a drop today. I also own TROW in my IRA and that is a good choice, they had a special dividend earlier last year which was especially nice. Outside of banking I have AFL for insurance, thinking of adding CINF, but the payout ratio is higher than my liking.

[rayray]

I'm with Eric on TROW, BLK, AMP and WFC. Others to consider are the big 5 Canadian Banks such as RBC, TD, BNS, BMO and CM, they are very strong institutions that have been paying dividends since the 1800's. Definitely read about them because they are quite unique from each other and with Canada going into a recession/housing issue now and through the next several months might provide great investment opportunities. What's happening in Canada is not what happened to the U.S. back in 2008/09--they're banking system is not the same as ours. In short, the Canadian Banking system has a very strong financial backbone that goes back well over a hundred years. Worth reading and researching even if you don't invest in Canadian Banks.

Other financials I like are in the insurance sector such as Chubb/ACE (these two will be one), Travelers and of course one of my favorites but it's not a DG stock the mini-Berk Markel (MKL). And let's not forget BRK.B.

I own and very long on BRK.B/MKL/ACE/TROW/BLK/RBC/BNS/BMO/TD/CM

[Kerim]

Good point about BRK.B, rayray. Not a pure financial, but definitely on my list. (Even bought a little more today.)

No BEN fans here?

[KenBob]

I have some ORI for insurance. I used to have the regional bank NPBC, but sold when it was anounced that it was to be acquired. Another regional bank CBU is on my shortlist, but it will be awhile before I get to it.

[Roadmap2Retire]

To elaborate on rayray's point...the Canadian banks are different from the US banks. The main focus for the institutions is long term stability and steady growth. Like rayray pointed out, the banks have existed and paid dividends since the 1800s.

Yes, there are problems such as housing bubble, recession, commodity market collapse that provide headwinds in Canada. But people seem to equate this to the US housing bubble and the collapse of the financial system. The Canadian picture is different in certain key areas:
- Most mortgages are insured and backed by taxpayer via CMHC (Canadian Mortgage Housing Company). The Federal government has repeatedly stepped in the last few years (last intervention was 2-3 years ago) - so that folks cannot buy houses with less than 5% downpayment. Also, anyone with less than 20% downpayment is required to buy mortgage insurance. One contrary point here is that over the last few months, the number uninsured home owners have increased - having found some loopholes.
- The more important point to consider is that the laws here in Canada are different. Like the US, we cannot walk away from the mortgage if the housing prices crash. We are liable and these are "full recourse" loans. More details here

All to say, the Canadian banks are fine and arent going to collapse as some ppl fear. And with extremely attractive valuations, they provide great opportunity here.

[crimsonghost747]

Like rayray said you should set your eyes on Canadian banks for this one. I consider them to be much more conservative than the US banks. I did quite a bit of research on them and decided to go with CIBC (CM.TO) but many people on this forum own others too. So definitely worth reading about them, roadmap2retire has some good articles about them in Seeking Alpha.

[rapidacid]

(09-04-2015, 02:58 PM)Kerim Wrote: No BEN fans here?

I'm a huge BEN fan but unfortunately their low yield precludes me from talking about them too often.

[Kerim]

(09-05-2015, 08:04 AM)rapidacid Wrote:

(09-04-2015, 02:58 PM)Kerim Wrote: No BEN fans here?

I'm a huge BEN fan but unfortunately their low yield precludes me from talking about them too often.

BEN's yield is very interesting -- very low if you consider only the regular dividends, but much more exciting if you factor in the special dividends that they are fond of paying. Of course those are not predictable, but in the years that they've been paid, it can more than double the "regular" dividend.

[rapidacid]

(09-05-2015, 08:09 AM)Kerim Wrote: BEN's yield is very interesting -- very low if you consider only the regular dividends, but much more exciting if you factor in the special dividends that they are fond of paying. Of course those are not predictable, but in the years that they've been paid, it can more than double the "regular" dividend.

Definitely forgot about this.

According to my calculations, since the beginning of 2000 BEN has paid out quarterly dividends that total to $8.98 / share. During this time they've also paid out 5 special dividends that have totaled $11.02 / share ( http://www.nasdaq.com/symbol/ben/dividend-history )

So actually $20 / share in dividends since 2000

Comparing the normal dividends over the past 15 years to the total dividends over the past 15 years gives the normal dividend as only 44.9% of the total dividends

8.98 / 20 = .449

BEN's current dividend is $0.60 / year

Solving for what BEN's total / shadow dividend might currently be gives us:

.449 = .6 / X
.449X = .6
X = .6 / .449
X = $1.34

BEN's current price is $39.01

Current stated yield:

$0.60 / $39.01 = 1.54%

Total current yield, given last 15 years of history, might look something like:

$1.34 / $39.01 = 3.43%

[navyasw02]

Thanks for that info. I had always dismissed BEN as their yield is below my threshold. Maybe I should look at it closer now.