This Dividend Stock Is Cheap (“Buy” Rating)

Fifth Third Bancorp - stock ticker FITB - is a diversified regional bank holding company that offers a range of financial services and products, such as deposits, lending, transaction processing, and advisory solutions. Now bank stocks are popular - Fifth Third's stock is up almost 60% over the last six months. However, even after this sudden resurgence, the stock still looks attractive. It was pushed down so far, for so long, that there's a lot of coiled spring to unwind here.

And while that spring unwinds, investors can look forward to collecting a market-beating dividend that's growing like clockwork. The company has already increased its dividend for 10 consecutive years. Their five-year dividend growth rate is 15.1%, which handily beats any kind of inflation. That growth comes on top of the stock's yield of 3.2%. This dividend, by the way, is more than twice as high as what the broader market offers. It's also 40 basis points higher than the stock's own five-year average yield. With a payout ratio of 59%, the dividend is easily covered - and that's after using depressed GAAP EPS. Once the bank moves past the pandemic, reserves will be released and the payout ratio will drop as a result of rising EPS.

I love dividend growth stocks in the "sweet spot". The sweet spot is a yield of between 2.5% and 3.5%, paired with a high-single-digit dividend growth rate. This stock is clearly right there. Here's the bottom line, guys: Fifth Third Bancorp is a quality regional bank that has shown an exceptional ability to grow in a challenging environment. And deepening exposure to one of the fastest-growing areas of the United States gives them a bright future. With a market-beating yield, double-digit dividend growth, a moderate payout ratio, and the potential that shares are 9% undervalued, this dividend growth stock is still on sale.

Video Length: 00:11:46

Disclaimer: Please consult with a licensed investment professional before investing any of your money. Never invest in a security or idea featured on this channel unless you can afford to lose ...

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.