Despite some dismal recent earnings reports from the banking sector, a number of bank stocks are still compelling for long-term investors.As the market reaction to recent earnings reports from Wachovia ( WB) and Bank of America ( BAC) attests, banks stocks are certainly subject to headline risk over the short term, as the mortgage meltdown and housing slump continue to dominate the news. The good news is that those banks are just two of the
- Dividend yield of at least 5%. This is normally quite greedy, but not in this market with so many beaten-down bank stocks.
- Price-to-book-value ratio below 2.
- Dividend payout ratio below 100%. As we are seeing with Washington Mutual, it can be quite scary if a holding company pays out more than it earns.
- Nonperforming assets comprising less than 1% of total assets. (One of the listed companies, Huntington, has now exceeded this level of nonperforming assets.)
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Three of five bank stock pics beat their respective indices from Sept. 7-Oct. 25