Selloff Can't Tarnish Banks' Yields

BofA is "trading less than 10 times forward earnings and [has] dividend yield of 5.3%. It's not a distressed stock, it's not a distressed company," says Ganesh Rathnam, an equity analyst at Morningstar. "These businesses -- they earn 20% of return on equity. These are great businesses. There are fabulous opportunities to be had in this company."

Wachovia's 14% share-price decline this year has also created a "buying opportunity," adds Keith Horowitz, an analyst at Citigroup.

"We've been surprised by how weak the stock has been," Horowitz writes in boosting his rating to buy from hold. "We see Wachovia's credit quality as more likely to be a future positive catalyst for the stock as we see less of a credit headwind here than other banks."

Like most banks, Wachovia's provision for loan losses was substantially higher in the second quarter. But Horowitz believes the bank's losses will be "manageable," and at recent prices the stock yields 4.6%.

Citi yields 4.4% at recent levels and Wells 3.6%. Among the harder-hit financial stocks in recent weeks, J.P. Morgan yields 3.4% and Goldman just 0.7%, according to Yahoo! Finance.

Others remain skittish. Dick Bove at Punk Ziegel, for instance, points to the collapse of the subprime mortgage market and an overflowing pipeline for high-yield debt tied to leveraged buyouts.

« Previous Page

1 2 3

Next Page »