Jensen: A Pair of Names Worth Banking On

Wells Fargo (WFC) is an over $200 billion market capitalization bank with over 250,000 employees. It is the largest residential lender in the country.

Three reasons to pick up Wells Fargo at $35 a share:

• The stock yields 2.5% at just under a 30% payout ratio. The company also has quadrupled its dividend payouts since emerging from the financial crisis.

• It has slightly beat earnings estimates the last three quarters and I would look for that to continue when the company reports earnings tomorrow.

• WFC is selling for less than 10x forward earnings and has a very reasonable five year projected PEG (1.24) for a dividend payer.

U.S. Bancorp (USB) is a large Midwest based lender that currently is the third biggest residential lender in the U.S.

Three reasons USB is a good long-term value for income investors at under $35 a share:

• USB yields 2.2%, has a payout ratio of under 30% and has almost quadrupled its payout since 2009.

• Consensus earnings estimates have ticked up nicely over the past 90 days for fiscal 2012 and fiscal 2013. The company has also slightly beat earnings estimates each of the last six quarters.

• The company sports an A+ rated balance sheet, sells at 11.3x forward earnings and S&P rates its fundamentals (Credit Quality, Loan Growth, etc.) as the best among major banks.

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