Seven Huge Dividend Banking Investments to Purchase as Inflation Protection

Seven huge dividend banking investments to purchase offer inflation protection without sacrificing potential share-price appreciation.

The seven huge dividend banking investments to purchase are boosted by favorable microeconomic conditions that should enhance business opportunities for financial institutions and their borrowers. A recent rally in the financial services sector also should keep the seven huge dividend banking investments to purchase on the rise in the fourth quarter as interest rates and an improved economic outlook rise, amid reduced COVID-19 cases.

Many of the seven huge dividend banking investments are receiving close attention from investment industry veteran Jim Woods, leader of the Successful Investing and Intelligence Report newsletters, as well as head of the Bullseye Stock Trader and Eagle Eye Opener advisory services. Woods advised his Intelligence Report subscribers on Oct. 15 that he so far is seeing upbeat third-quarter 2021 earnings results for financial stocks, along with a rise in interest rates, bond yields and economic growth.

For example, the Financial Select Sector SPDR Fund (XLF) easily has outpaced the SPDR S&P 500 ETF (SPY) in 2021, Woods noted. Despite SPY jumping 19.1% year to date, XLF has soared 33.9%. That surge seems certain to continue based not only on the fundamental reasons just cited but also from a technical perspective, as the pandemic weakens and bank stocks strengthen, he added.

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Seven Huge Dividend Banking Investments to Purchase Led by Financial Select Sector SPDR Fund

XLF is designed to correspond generally to the price and yield performance, before expenses, of publicly traded equity securities of companies in the Financial Select Sector Index. The fund’s top holdings include huge dividend banking investments, along with Warren Buffett-led Berkshire Hathaway Class B (NYSE: BRK.B). The fund currently has 66 holdings, so it avoids the risk of becoming too heavily concentrate in any one position.

The Successful Investing newsletter that Woods writes follows domestic and international moving averages to provide guidance about when to be in and out of those markets. The Domestic Fund Composite (DFC) is up nearly 5% above its 39-week moving average to stay firmly ensconced in “Buy” status, Woods continued.

A 1.85% spike in the International Fund Composite (IFC) put it above its 39-week moving average, along with the Dow Jones World Index that is used as a confirming indicator, Woods noted. Although Successful Investing‘s International Plan remains in “Buy” status, Woods indicated that he is watching the indicator closely. He noted that the S&P 500’s 1.7% jump on Oct. 14 marked its biggest one-day percentage move since March. Those gains stretched pretty much across the broad market, with financial, technology, cyclical and energy stocks all participating in the rally, Woods wrote in the Oct. 15 update to his Successful Investing subscribers.

Paul Dykewicz interviews investment veteran Jim Woods, editor of Successful Investing.

Diversified Fund Added to Seven Huge Dividend Banking Investments to Purchase

Dividend-paying bank stocks account for a significant portion of what pension fund chairman Bob Carlson called one of his “favorite value stock” investments. Carlson, who leads the Retirement Watch investment newsletter and serves as chairman of the Board of Trustees of Virginia’s Fairfax County Employees’ Retirement System with more than $4 billion in assets, said Oakmark uses valuation measures to assess companies in various industries. Those industries include financial services where huge banks have offered value and profits for some time.

Retirement Watch chief Bob Carlson answers questions from Paul Dykewicz.

Investors Can Pick from Among Seven Huge Dividend Banking Investments to Purchase

Financial services account for 33.9% of Oakmark’s holdings and New York-based Citigroup Inc. (NYSE: C) is its fourth-largest position. Detroit-based Ally Financial (NYSE: ALLY) is the fund’s largest holding and comprises 3.9% of its portfolio.

When interest rates rise, big banks traditionally can widen the spreads they earn between what they pay for deposits and what they can collect in higher interest rates from borrowers. But a problem can arise later if banks retain too many fixed-rate loans that can lose their appeal if interest rates ascend. One drawback of Oakmark for dividend seekers is that its current yield is just 0.1%, compared to at least 1.7% for each of the stocks among the seven huge dividend banking investments to purchase for inflation protection.

Seven Huge Dividend Banking Investments to Purchase Receive Analysis from Cash Machine Chief Perry

Floating rate business lending, specialty mortgage real estate investment trusts (REITs), property REITs, real estate trusts, covered-call blue-chip stock funds, private equity and convertible debt are some of the asset classes to own when rates and inflation are climbing, said Wall Street veteran Bryan Perry. As the leader of the high-yield-focused Cash Machine investment newsletter and the Premium Income, Quick Income Trader, Breakout Profits Alert and Hi-Tech Trader services, Perry seeks to move into stocks when their operating conditions brighten.

Paul Dykewicz interviews Bryan Perry about investing opportunities.

BofA Raises EPS Estimates for Huge Banks by an Average of 3% 

BofA recently raised its earnings per share estimates (EPS) for the huge banks it follows by an average of 3%. Since rising earnings typically are correlated to increasing share prices, the improved outlook is significant.

Management teams at huge banks generally have been offering guidance about expecting increased fee revenue, according to BofA. The investment firm’s estimates anticipate another quarter of credit-driven earnings per share (EPS) outperformance.

Loan growth/spread revenue and macro-economic trends likely will be two key drivers for the big bank stocks, BofA wrote in a recent research report. Other signs of big bank performance will come from the results of non-financials in the weeks ahead to show whether supply chain disruptions are easing and if consumers and businesses are spending, BofA added.

Seven Huge Dividend Banking Investments to Purchase Include Citigroup

New York-based Citigroup earned a $200 price objective from BofA. The investment bank assigned valuation multiples below the bank’s peers due to its lower return metrics.

Risks to Citigroup attaining that target include an economic downturn, further scrutiny of the financials industry and increased expenses tied to a consent order. To top those expectations, Citigroup would need better-than-expected credit performance, i.e., lower loan losses, and continued market share gains that drive revenue growth, BofA wrote.

Citigroup’s management recently offered guidance that it could face increased expenses. But Citigroup’s pursuit of the sale of its consumer businesses in 13 countries across the Asia-Pacific (APAC) region and other factors could skew its risk/reward to the upside, BofA added.

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Goldman Sachs Attains Perch for Seven Huge Dividend Banking Investments to Purchase

New York’s Goldman Sachs (NYSE: GS) received a $455 price objective from BofA. The investment firm wrote the valuation was in line with historical levels.

To outperform that forecast, stronger capital markets activity would be required, BofA wrote. Risks to meet that estimate are a weaker economy, macroeconomic or geopolitical issues, competition, structural pressures, tougher global regulation and litigation, BofA added.

Goldman Sachs has underperformed its peers since the September Federal Open Market Committee (FOMC) meeting. Goldman’s underperformance started with the announcement of its acquisition of Atlanta-based GreenSky, the largest financial technology platform for home improvement consumer loan originations. The all-stock transaction is valued at approximately $2.24 billion.

In announcing the deal on Sept. 15, Goldman issued a statement that GreenSky’s differentiated lending capabilities and “market-leading” merchant and consumer ecosystem will help accelerate efforts to create a consumer banking platform of the future. A key goal is to help tens of millions of customers take control of their financial lives and drive higher, more durable returns.

A BofA research note mentioned some Goldman investors seemed unsure about the consumer strategy. However, BofA opined that the “negative sentiment” could be overdone and its “buy” rating on Goldman remains intact. I personally have owned Goldman’s stock for more than a year and have no plans to sell.

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JPMorgan Chase & Co. Gains Spot Among Seven Huge Dividend Banking Investments to Purchase

New York-based JPMorgan Chase (NYSE: JPM) received a $190 price objective from BofA. Possible risks to JPMorgan Chase reaching BofA’s price objective are macro threats such as slower-than-expected rate increases, additional regulatory requirements and scrutiny of the financial industry.

“While historically, the stock has tended to sell-off post earnings, we believe that JPM still offers an attractive risk/reward,” BofA wrote in its recent research note. “Importantly, the market appears willing to look past JPM’s premium valuation and add exposure to the stock given the optionality to higher interest rates, to rebounding credit card balances and the potential for continued momentum in the capital markets business.”

The bank could outperform its outlook with better-than-expected credit quality, i.e., lower loan losses, and better interest rate defensibility, BofA wrote.

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Morgan Stanley (MS) Secures Place Among Seven Huge Dividend Banking Investments to Purchase

A $105 price objective for New York’s Morgan Stanley takes into account a rising valuation multiple due to an increased recurring revenue mix and rising return on equity stemming from a strategic shift in its business. Potential outperformance of that target would depend on stronger wealth and asset management trends and capital markets activity, as well as higher rates, BofA wrote.

Risks to reach that goal include economic and capital market weakness, low rates, increased macro issues, tougher regulation and litigation.

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Wells Fargo & Company Joins Seven Huge Dividend Banking Investments to Purchase

Wells Fargo (NYSE: WFC), of San Francisco, gained a $60 price target from BofA. The investment firm described the valuation as in line with its peer average.

Risks to attaining the price objective are an economic slowdown, elevated expense trajectory and slower-than-expected resolution of its consent orders. To top the price target of BofA for the bank, the catalysts could include better-than-expected credit quality, i.e., loan losses and material expense management that improves visibility on future earnings.

“Our conversations with investors suggest some concern around franchise attrition the longer Wells is required to operate under the asset-cap,” BofA wrote. “The path to stock outperformance is not straightforward, but at the current valuation, we see the risk/reward skewed to the upside.”

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Improving COVID-19 Case Numbers Could Help Seven Huge Dividend Banking Investments to Purchase

The Delta variant of COVID-19 has proven to be highly transmissible, but the current case numbers are dipping as the adult population increasingly is vaccinated and mask wearing occurs in hot spots for the virus. Plus, the U.S. Food and Drug Administration (FDA) recently issued emergency use authorization (EUA) for a single booster shot of the Pfizer-BioNTech COVID-19 vaccine for high-risk groups.

A booster shot of the Pfizer-BioNTech vaccine can be given to people aged 65 years and older at least six months after they receive a second dose of that vaccine to guard against COVID-19. The booster also is approved for those aged 18 years and older who have underlying medical conditions and people aged 18 and older who live or work in high-risk settings.

The Centers for Disease Control and Prevention (CDC) reported on Oct. 15 that  218,318,056 people, or 65.8% of the U.S. population, have received at least one dose of a COVID-19 vaccine. The fully vaccinated total 188,655,196 people, or 56.8%, of the U.S. population, according to the CDC.

COVID-19 cases worldwide totaled 240,017,638 cases and led to 4,888,586 deaths, as of Oct. 15, according to Johns Hopkins University. U.S. COVID-19 cases hit 44,878,008 and caused 723,667 deaths. America has the dreaded distinction as the country with the most COVID-19 cases and deaths.

The seven huge dividend banking investments to purchase provide investors a path to earn rising profits and respectable dividend payments in the months ahead.