Let's Call It A Comeback

View from the Observation Deck

  1. Today's blog post on bank dividends revisits the one we did last June (Click here). 
  2. The main difference between today's chart and last June's is that the estimated dividend payments for 2018-2019 have been raised, particularly the projection for 2019.  
  3. Since the biggest banking institutions in the U.S. were at the epicenter of the 2008-2009 financial crisis, investors should not be surprised that the recovery has been a bit of a slow grind to this point, in our opinion. 
  4. As indicated in the chart, the bottom in annual dividend distributions for the S&P 500 Banks Index was $1.34 in 2010. The recovery in dividend payments is now in its eighth year. Even if the $10.43 per share dividend for 2020 proves accurate, it would still stand 28.32% below 2007's payout.   
  5. As of the close of trading on 5/7/18, the S&P 500 Banks Index stood 19.42% below its all-time high set on 2/20/07, according to Bloomberg. 
  6. The outlook for earnings is encouraging. As of 5/4/18, Bloomberg's consensus earnings growth rate estimates for the S&P 500 Banks Index for 2018, 2019 and 2020 were 23.3%, 11.6% and 11.7%, respectively.
  7. The recovery in the banking sector remains a work in progress, and therein lies the opportunity for investors, in our opinion.  
This chart is for illustrative purposes only and not indicative of any actual investment. There can be no assurance that any of the projections cited will occur. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Banks Index is capitalization-weighted and comprised of 18 constituents.

Download a PDF of this post, please click here.
Posted on Tuesday, May 8, 2018 @ 1:22 PM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.