NEW YORK (TheStreet) -- In light of the brutal pummeling for bank stocks on Monday, in the wake of in the wake of S&P's downgrade of its long-term debt rating for the United States, along with additional downgrades of government-sponsored enterprises and insurers, Oppenheimer analyst Terry McEvoy sees safety in dividends.
Saying that "higher dividend stocks may outperform" if the high level of market volatility continues, the analyst recommended FirstMerit (FMER), Iberiabank (IBKC) and Huntington Bancshares (HBAN), in a report published Tuesday.
All three names are rated "Outperform" by Oppenheimer and feature "attractive dividend yields, strong capital positions and healthy credit profiles, according to McEvoy.
FirstMerit closed at $12.51 Tuesday, declining 8% for the day and 14% from a week earlier. Based on a quarterly payout of 16 cents, the shares have a dividend yield of 5.12%. McEvoy's price target for the shares is $19.00.Iberiabank closed at $45.38 Monday, sliding 8% for the day and 11% from a week earlier. Based on a quarterly payout of 34 cents, the shares have a dividend yield of 3.00%. McEvoy's price target is $70.00. Huntington Bancshares closed at $5.09 Monday, down 8.5% for the day and 18% from a week earlier. Based on a four-cent quarterly payout, the shares have a dividend yield of 3.25%. Huntington increased the dividend from a penny, when the company announced its second-quarter earnings. McEvoy's price target for the shares is $7.50. The analyst said that "with capital levels growing and limited opportunities to deploy capital via loan growth or acquisitions," more banks are deciding to increase their return of capital to investors.
Philip van Doorn. To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV