Shares of this bank were recently upgraded by Odeon Capital, to ‘Buy.’ The shares have a current dividend yield of 2.84%, paid quarterly.
Regions Financial Corporation (RF)
From Contrarian Outlook
We’re going after regional banks because their nimble shares are hyper-tuned to Treasury yields. You can see that in the performance of the SPDR S&P Regional Banking ETF (KRE), in purple below:
Where Treasury Yields Go, Small Banks Follow
That’s part 1 of our taper-driven small-bank play. As for parts 2 and 3, we want small banks that are hiking dividends or buying back shares—and ideally both. That’s because both dividend growth and buybacks ignite share prices. (And now is an ideal time to hunt for buybacks, with repurchases likely to break the all-time record of $224 billion in the third quarter, according to S&P Dow Jones Indices.)
Buybacks reduce a company’s share count as management repurchases its shares and cancels them. That boosts earnings per share, driving up share prices as investors take note.
You can see buybacks’ effect on share prices with Regions Financial, a holding of the regional-banking ETF we just mentioned. RF has branches across the South and Midwest and yields 2.8% today. The bank’s buybacks over the last five years have provided a floor for the stock, sending it higher as management slashed shares outstanding by 21%.
Buybacks Boost Regions’ Share Price
Now let’s talk dividends—because few people realize that they, too, ignite share prices. And payouts are set to get a boost as Powell eases off his Treasury buys.
The connection between dividends and share prices, a phenomenon I call the “Dividend Magnet,” is easy to spot. Let’s layer in Regions’ rising payout (in blue below) to the chart we just looked at. You can see the price grinding higher with every dividend hike (the gap between Regions’ share price and dividend is our upside):
Regions’ “Powell-Powered” Payout Hikes Lift Its Share Price
Supported by its buybacks and surging dividend, Regions’ stock snapped back from the 2020 crash. Further tapering by Powell will power both dividends and buybacks, pushing Regions’ shares higher still!
Brett Owens, Contrarian Outlook, BNK Invest Inc., 500 North Broadway, Suite 265, Jericho, NY 11753 USA, 516-620-4294, November 9, 2021