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5 Buy-Rated Bank Stocks With Safe and Solid Dividends (Update 1)

4. JPMorgan Chase

Shares of JPMorgan Chase (JPM - Get Report) closed at $31.00 Monday, down 5% year-to-date, following last year's 20% decline. Based on a 30-cent quarterly payout, the shares have a dividend yield of 3.87%.

The shares trade just below tangible book value, and for less than six times the consensus 2013 EPS estimate of $5.38. The consensus 2012 EPS estimate is $4.42.

Following CEO James Dimon's disclosure on May 10 of $2 billion in second-quarter hedge trading losses -- a figure which may grow this quarter, as the company works to unwind its hedge trading positions -- JPMorgan on May 21 announced that it had suspended its share repurchase program, with Dimon saying "we intend to maintain the dividend." Following the completion of Federal Reserve stress tests in March, the company's board of directors had authorized $12 billion in share buybacks during 2012, with another $3 billion authorized for the first quarter of 2013. The company had completed $1.3 billion in buybacks through April 30.

Even with the expected weak second quarter results, JPMorgan's dividend seems quite safe, with the current 30-cent payout being only25% of its first-quarter EPS of $1.21.

JPMorgan's shares have declined 24% since closing at $40.74 before Dimon's announcement on May 10, and Bank of America Merrill Lynch analyst Guy Moszkowski said on May 21 (after the shares closed at $32.51) that the selloff was "overdone," with the shares trading below tangible book value, "despite [the] long-term [return on tangible equity] power of 15%+ we envisage."

Factoring in hedge trading "losses well in excess" of $5 billion, Moszkowski estimates that JPMorgan will earn $3.85 a share this year, followed by earnings of $4.87 during 2013.

Raymond James analyst Anthony Polini late on Tuesday lowered his rating for JPMorgan Chase to "Outperform" from "Strong Buy," while cutting his price target for the shares to $46 from $52, and lowering his 2012 earnings estimate to $4.45 a share from $4.70, and his 2013 EPS estimate to $5.10 from $5.48.

Polini said that while the valuation on the shares is "very attractive, we believe uncertainty related to macroeconomic issues and the [aftermath of the hedge trading losses] could undermine strong price appreciation over the near term."

Interested in more on JPMorgan Chase? See TheStreet Ratings' report card for this stock.
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