Regional banks (KRE) never entirely recovered from last year’s Q4 downturn and have underperformed both the broader market and the rest of the financial sector since. But one silver lining is that the group is attractive with regards to dividends. Of the regional bank stocks in the S&P 1500, 85% have a yield that outpaces the index and 63% have a higher yield than the financial sector. Currently, the average regional bank stock in the S&P 1500 yields 2.73%. One of the ones that yields even more at 4.2% is KeyCorp (KEY). Additionally, unlike some of the other regional bank stocks that have elevated yields due to downtrends over the past year, KEY has a more attractive chart and is actually sitting in a modest uptrend having made a series of higher highs and higher lows since the start of the year. Currently, the stock is experiencing mean reversion after reaching overbought levels.
Given this uptrend, the desirable yield has more been a result of steady and more recently rapid growth in the dividend rather than declines in stock price as is the case with other regional banks. Today, that dividend is 30% larger than it was just five years ago. That is more than twice the average growth of all regional bank stocks over the same time frame and nearly triple that of all financial stocks in the S&P 1500. Most of that growth has occurred in the past couple of years alone. More specifically, last September KEY raised its quarterly dividend by 5 cents (from $0.12 to $0.17), rather than the one-cent increases observed in previous years. The most recently declared dividend was also raised another 2 cents to $0.19. With a payout ratio of 42%, KEY has some safety in its dividend; even with this recent growth. Start a two-week free trial to Bespoke Institutional to access our interactive Security Analysis tool and much more.