This bank is trading at an undervalued level and has a current dividend yield of 4.91%, paid monthly.
People’s United Financial, Inc. (PBCT)
From Sure Retirement
People’s United Financial, Inc. (PBCT) is a regional bank and financial services company engaged in real estate and mortgage lending, equipment financing, consumer loans, life insurance, brokerage services, wealth management, and traditional banking services. The company has a network of 400+ branches, with total assets of $52 billion and a market capitalization of $6.9 billion.
In mid-January, People’s reported financial results for the fourth quarter of fiscal 2019. The company grew its operating earnings-per-share 3% over last year’s quarter, from $0.36 to a record $0.37, thanks to the acquisition of United Financial. For the full fiscal year, the company reported operating earnings of $552 million, or $1.39 per share, up 6.1% compared with fiscal 2018. Operating earnings-per-share have now increased for 10 consecutive fiscal years.
People’s United has a positive growth outlook in the coming years. Acquisitions will continue to help the company expand its geographic reach and customer base. Recent acquisitions include VAR Technology Finance, which focuses on serving the technological sector, BSB Bancorp, as well as the United Financial deal.
We expect $1.46 in earnings-per-share in 2020. Based on this, the stock trades for a price-to-earnings ratio (P/E) of 11.1. Our fair value estimate is a P/E of 13, which we believe is warranted due to the company’s growth potential and dividend history. Expansion of the valuation multiple could produce a slight bump of ~3.2% annually to shareholder returns through 2025. Combining valuation changes with the 5.0% expected annual earnings growth and the dividend yield, we expect total returns of 12.6% per year for People’s United Financial stock over the next five years.
Ben Reynolds, Nick McCullum, Bob Ciura, Josh Arnold, and Samuel Smith, Sure Retirement Newsletter, www.suredividend.com, ben@suredividend.com, February 9, 2020