The S&P 500 itself is still cruising along near all-time highs. However, many individual stocks within the market have already entered correction territory. With some of these stocks down 10% or more in a matter of only weeks, good deals have presented themselves.

Huntington Bancshares Incorporated (HBAN) is a regional bank holding company that offers a range of traditional banking services, such as deposits, auto financing, mortgages, and insurance products. Founded in 1866, Huntington is now a $19 billion (by market cap) major Midwest player that employs almost 16,000 people. Huntington operates over 800 branches which are located in the American Midwest region. Their core market is Ohio. They rank third in deposit share in Ohio, holding 15% of the state’s deposits. The pandemic has made the last year difficult for almost all people and all businesses, and banks are no exception.

However, US banks came out of the pandemic in better condition than expected. And there’s much to look forward to for US banks. A global economic recovery and the possibility of rising interest rates rank high on that list. That’s speaking about US banks generally. In regard to Huntington specifically, they just closed on an exciting merger with fellow Midwestern bank TCF Financial Corp. This move provides instant scale and creates a formidable competitor.

The new regional powerhouse has over $135 billion in total deposits. It’s now a top-25 bank in the United States. Due to an overlapping footprint in the Midwestern region, Huntington sees room for significant synergies – approximately 37% of TCF’s noninterest expense. While it’ll take time to work everything out, this merger could end up being a tremendous win for the combined organization. For instance, Huntington has stated that it expects the transaction to be 18% accretive to 2022 EPS. That kind of substantial accretive growth translates to higher profits, and it gives the bank the ability to pay out even bigger dividends. Morningstar rates HBAN as a 4-star stock, with a fair value estimate of $18.00. CFRA is another professional analysis firm, and I like to compare my valuation opinion to theirs to see if I’m out of line. They similarly rate stocks on a 1-5 star scale, with 1 star meaning a stock is a strong sell and 5 stars meaning a stock is a strong buy. 3 stars is a hold. CFRA rates HBAN as a 3-star “HOLD”, with a 12-month target price of $16.00. I came out within pennies of where Morningstar is at. Averaging the three numbers out gives us a final valuation of $17.36, which would indicate the stock is possibly 27% undervalued.

Bottom line: Huntington Bancshares Incorporated (HBAN) is a high-quality regional bank that just closed on an accretive merger that gives them additional scale precisely when additional scale is helpful to benefit from an economic recovery. With a market-smashing yield of 4.4%, 10 consecutive years of dividend raises, double-digit dividend growth, a moderate payout ratio, and the potential that shares are 27% undervalued, dividend growth investors should strongly consider depositing some of these shares into their portfolios.

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