The financial services sector includes insurance companies, banks, brokerages, mutual funds and other similar companies. Before the financial services meltdown of 2008 and 2009, these stocks were the cornerstone on many income portfolios. The companies were flush with cash, their stocks provided relatively high yields, good dividend growth rates and carried very little perceived risk.
Unfortunately, things are not always as they seem. Under the surface banks were making questionable loans, while investment firms were creating and peddling exotic financial instruments. In effect, their CEOs were building houses of cards in a hurricane - it was destined to come tumbling down, and it did.
As a result, investors learned some very valuable, but expensive lessons. This should serve as a warning when investing in the financial services sector - not a stop sign. Many of these companies are now in very lucrative positions.
With interest rates as low as they are, banks are enjoying decent spreads, not to mention all the new fees they are charging their customers. As more consumers take advantage of electronic banking, we are becoming more tied to our accounts. The pain threshold of changing banks is high, and they know it.
Have you ever filed an insurance claim and were satisfied with the outcome?
Insurance companies are the ultimate business. They charge premiums to protect you, invest the premiums and earn a return, which is then reinvested. The money is theirs to keep if you don't file a claim. If you do file a claim, the insurance company will find ways to minimize what they actually pay you - then raise your rates for filing a claim.
You can complain about these companies, or invest in the industry and profit from them. I've chosen the latter.
This week, I screened my dividend growth stocks database for financial services companies with a yield at or above 3.5% and have increased their dividends for at least 14 consecutive years. The results are presented below:
Southside Bancshares Inc. (SBSI) owns Southside Bank, which primarily provides financial services to individuals, businesses, municipal entities, and non-profit organizations.
Years of Dividend Growth: 18 | Yield: 3.5%
Community Trust Bank Corp. (CTBI) owns and operates Community Trust Bank Inc. of Pikeville, Ky., which provides commercial banking services in Kentucky and West Virginia; and a trust company.
Years of Dividend Growth: 33 | Yield: 3.6%
Tompkins Financial (TMP) owns Tompkins Trust Co., The Bank of Castile and The Mahopac National Bank, which provide banking services in upstate New York; and VIST Bank in Pennsylvania.
Years of Dividend Growth: 27 | Yield: 3.6%
Community Bank System (CBU) provides financial services in upstate New York, and in northeastern Pennsylvania as First Liberty Bank & Trust.
Years of Dividend Growth: 20 | Yield: 3.6%
Arrow Financial Corp. (AROW) owns Glens Falls National Bank & Trust Company and Saratoga National Bank & Trust Company, which offer commercial and consumer banking and financial products in U.S.
Years of Dividend Growth: 18 | Yield: 4.0%
People's United Financial Inc. (PBCT) provides a full range of banking and financial service products to individuals, corporations and municipal customers in the U.S. Northeast.
Years of Dividend Growth: 16 | Yield: 4.7%
Old Republic Intl (ORI) writes property and liability, mortgage guaranty, title and life, and disability insurance.
Years of Dividend Growth: 32 | Yield: 5.4%
Mercury General Corp. (MCY) is an insurance holding company that operates primarily in California and writes a full line of automobile coverage for all classifications of risk.
Years of Dividend Growth: 26 | Yield: 5.6%
As with past screens, the data presented above is in its raw form. Some of the the companies would be disqualified for poor dividend fundamentals. However some of the others may be worth additional due diligence.
My database, D4L-Data, is an Open Office spreadsheet containing more than 20 columns of information on the 230+ companies that I track. The data is sortable and has built-in buttons and macros to make it easy to use. Companies included in the list are those that have had a history of dividend growth. The D4L-Data spreadsheet is a part of D4L-Premium Services and is updated each Saturday for subscribers.
Full Disclosure: Long CTBI, PBCT, in my Dividend Growth Portfolio and long MCY in my High-Yield Portfolio. See a list of all my dividend growth holdings here.
- 5 Stocks With A Strong Cash To Dividend Coverage
- Dividend Stocks Are My Conviction
- Are The Dividends Safe For These High-Yielding Stocks?
- My 2012 Top And Bottom Performing Dividend Stocks
- 7 Dividend Stocks With Room To Increase Their Payout
- High Yield Dividend Stocks in Gurus' Portfolio
- Top dividend stocks of Warren Buffett
- Top dividend stocks of George Soros
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