BB&T last month raised its quarterly dividend to 23 cents a share from 20 cents, for a yield of 3.01%, based on Monday's closing price of $30.52. Mosby said that his price target reflects "the strength of BBT's dividend yield," following the stress tests. "We believe BBT's dividend yield could reach as high as 3.3%, as compared to its current stock price," he said, with an annual payout of $1.00 a share.
Guggenheim estimates BB&T will achieve a 2013 ROTCE of 17.6%, with a cost of equity of 9.3%, for an excess return of 8.3%.
Stifel Nicolaus analyst Christopher Mutascio has lower expectations for BB&T, rating the shares "neutral," with a 2013 EPS estimate of $2.88 and a 2014 EPS estimate of $3.10. Mutascio said in a report on Jan. 22, that with both BB&T and U.S. Bancorp trading at roughly 10 times his firm's 2014 EPS estimates, "investors do not seem to be differentiating between the profitability levels of each bank. For investors looking to increase their exposure to higher quality/highly profitable banks by taking off some risk exposure amid the recent run in bank stocks, we prefer USB over BB&T at current levels."
Another "Top Pick"
(WFC - Get Report)
and Citigroup are Mosby's "current top picks" among large-cap banks, as "both have better than twice the amount of upside potential as the median" for the group. Mosby on Tuesday raised his price target for Wells Fargo's shares to $46.50 from $43.00, while raising his 2013 EPS estimate to $3.90 from $3.89 and lowering his 2014 EPS estimate to $4.30 from $4.40.
Guggenheim estimates that Wells Fargo's 2014 ROTCE will be 17.4%, with a cost of equity of 9.5%, for an excess return of 7.9%.
Wells Fargo in January raised its quarterly dividend to 25 cents from 22 cents, for a yield of 2.88%, based on Tuesday's closing price of $34.76.
"We estimate WFC's dividend yield post this year's [stress test] process could bounce up to 3.5%, possibly attracting yield and value investors back into the stock," Mosby said. Guggenheim estimates that the dividend payout for 2013 will be $1.20 a share.