Note from DTA: Thanks to the panic selloff across banking, there’s one dividend growth stock in particular Jason has been aggressively buying this week. He initiated a new position in the stock Monday… and then he bought shares again Wednesday. For the full details on this purchase — as well as a handful of other bargain dividend stocks he’s been buying — we urge you to consider signing up for Jason’s Patreon. Read on for another idea to consider right now.
With all of the crazy volatility going on across financials, in general, and banks, specifically, and regional banks, even more specifically, I’d be remiss if I didn’t talk about the opportunity we have today with U.S. Bancorp (USB).
U.S. Bancorp is a bank holding company with a market cap of over $50 billion. Well, U.S. Bank is technically a regional bank, but it’s actually one of the largest banks in the US. It exists almost in this nether-region between regionals and the “Big Four” TBTF banks. One might call it a “super-regional” bank. Regardless of how you classify it, I have zero doubt – let me repeat: zero doubt – that U.S. Bank will be just fine a week from now, a month from now, a year from now, a decade from now, etc.
The bank runs that hit a few specialized banks that mistakenly got wrapped up with, and overly focused on, crypto and startups have nothing to do with the likes of U.S. Bank. And so I think the dividend, and the growth of it, is just as sure as it’s ever been.
The bank has increased its dividend for 12 consecutive years.
You know we’re in strange times when bank stocks are offering yields that eclipse the likes of your usual high-yield suspects like utilities and REITs, but that’s what we’ve got going on now. This stock’s yield is 5.3%. To put that in perspective, its five-year average yield is 3.3%.
What an incredible spread there. And with a 10-year DGR of 10.1%, you’re getting plenty of dividend growth on top of that high starting yield. The payout ratio of 52% indicates no issues whatsoever with the dividend, despite the headlines and hoopla.
This stock looks materially undervalued after the stunning 40% drop from its 52-week high.
And much of this drop has occurred over just the last few days, as of the time of this writing. The 52-week high of $57.92 has completely evaporated. The stock’s pricing right now, which is close to where it was during the worst of the pandemic, is almost inexplicable.
Unless you see a risk of sudden failure, which I don’t see, this institution is available for a valuation that almost defies logic. Our last analysis and valuation video on the bank estimated its fair value at $57.54/share. That analysis is due for an update, which I hope to get on pretty soon. Meanwhile, this could be one of the best buying opportunities that’s ever existed for this high-quality bank.
— Jason Fieber
P.S. There’s one dividend growth stock in particular I’ve been aggressively buying this week… and if you’ve got room in your portfolio for this name, I’d be hitting the gas pedal here. Now is one of the best times you’ll ever see to invest in a business like this, in my view. For the full details on my latest purchases, as well as access to my entire stock portfolio, I invite you to join me over at Patreon.