Bank Stocks in Bargain Bin After Rout

NEW YORK ( TheStreet) -- Following Thursday's market pain -- especially for bank stocks -- investors need to move away from the screaming headlines for a moment and consider that nothing has really changed in two days, and the price action underscores some fantastic opportunities.

Following Warren Buffett's mantra of being "greedy when others are fearful," let's highlight some of the bargains:

Despite the sluggish economy, the lenders with the highest concentration in credit card loans -- including, of course, American Express ( AXP), Discover Financial Services ( DFS) and also Capital One ( COF) -- have all done an excellent job working through problem loans, and have been posting fantastic earnings results. That means a healthy generation of excess capital, which will support share prices one way or another. American Express repurchased $1 billion in common shares during the second quarter, and announced another $1 billion buyback plan in July. Those are very significant buybacks for a stock with a $56 billion market capitalization.

While they aren't bank plays, Visa ( V) and MasterCard ( MA) have also been posting stellar results, and Visa has also planned a $1 billion buyback.

TheStreet on Thursday highlighted 10 large banks with double-digit revenue growth, and several names firing on all cylinders, with organic loan growth, strong deposit growth and improved credit quality.

Many banks with well-supported dividend payouts are looking even more attractive after this week's price drops, and some of the dividend yields are downright juicy, especially when you consider that market rates are still dropping.

One of these is Huntington Bancshares ( HBAN), which just increased its quarterly payout to 4 cents, which translates to a dividend yield of 2.94% at Thursday's closing price of $5.45. That's a dividend payout ratio of only 25%, based on Huntington's second-quarter earnings of 16 cents a share, and the company reported solid loan growth in key areas, along with very strong deposit growth. While the 2.94% dividend yield may not be the most exciting figure, it sure compares well to a two-year Treasury yield of just 0.257%, at Thursday's close.

Huntington is also cheaply valued to forward earnings, trading for 8.6 times the consensus 2012 earnings estimate of 68 cents a share, among analysts polled by FactSet.

Bank of Hawaii ( BOH) has an even higher dividend yield of 4.17%, based on a 45-cent quarterly payout and Thursday's closing price of $43.12. The company has been a strong earner all through the credit crisis, although you pay a bit of a premium for the steady performance, as the shares trade for 13 times the 2012 consensus EPS estimate of 74 cents.

An under-the-radar name with a dividend well-supported by healthy earnings is Dime Community Bancshares ( DCOM) of Brooklyn. Dime's shares have a dividend yield of 4.19%, based on a quarterly payout of 14 cents and Thursday's closing price of $13.37. The company's dividend payout ratio is below 40%, based on second-quarter EPS of 36 cents.

Of course, the "big four" of Bank of America ( BAC), JPMorgan Chase ( JPM), Citigroup ( C) and Wells Fargo ( WFC) all remain cheaply priced, below eight times forward earnings estimates.

While it's a bit early to be considering significant buybacks for the big four -- with regulatory targets on their backs -- JPMorgan has a very attractive dividend yield following Thursday's 5% drop to a closing price of $37.92. The company is paying out 25 cents a quarter, for a dividend yield of 2.64%.

RELATED STORIES:




-- Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here: Philip van Doorn.

To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.

To submit a news tip, send an email to: tips@thestreet.com.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

More from Opinion

Red Hat CFO Tells TheStreet: Tech Trends Are Still in Our Favor

Red Hat CFO Tells TheStreet: Tech Trends Are Still in Our Favor

Throwback Thursday: Intel Edition

Throwback Thursday: Intel Edition

Intel's Next CEO Should Try Harder to Protect Its Flanks Against AMD and Others

Intel's Next CEO Should Try Harder to Protect Its Flanks Against AMD and Others

3 Warren Buffett Stock Picks That Could Be Perfect for Your Retirement Portfolio

3 Warren Buffett Stock Picks That Could Be Perfect for Your Retirement Portfolio

Wednesday Wrap-Up: GE and Facebook

Wednesday Wrap-Up: GE and Facebook