Two Banks Are Reporting Earnings and One Is My Top-Five Dividend Pick For 2013

NEW YORK (TheStreet) - The summer heat is barely able to keep up with the financial sector, and two key players report the week of July 8. I'm bullish on both, but one in particular. Let's take a look at expectations and how you can profit.

JPM Chart JPM data by YCharts

JPMorgan Chase ( JPM)JPMorgan is a leader in investment banking, asset management, private banking, private equity, custody and transaction services and retail and middle-market financial services. A component of the Dow Jones Industrial Average, JPMorgan is headquartered in New York and trades an average of 23 million shares a day, with a market cap of $200 billion.

52-Week Range: $33.10 to $55.90

Book Value: $52.02

The upcoming second-quarter earnings report is highly anticipated by optimistic investors expecting growth before the market opens on Friday, July 12.

Analysts' mean profit appraisal is currently $1.41 a share, a gain of 20 cents (14.2%) from $1.21 during the corresponding quarter last year. Analysts' estimates this quarter range from $1.29 to $1.63 a share.

I believe JPMorgan will beat (a safe bet, considering it beat or met during the last 12 quarters), but I also think JPM will report at least $1.50. I'm not alone in my optimistic view of the bank, as 25 out of 31 analysts rate the stock a buy or strong buy, and only one has a sell rating.

Analysts overall have called this one correctly. In the last 12 months, the shares have accelerated 47% higher. The average analyst current target price is $57.79. I think the target is too low and expect an increase above $65 soon.

A 30% share price appreciation is reasonable, considering the single-digit earnings multiple and an improving housing market. Higher interest rates may dampen refinancing profits, but that horse was thoroughly beaten anyway. Now it's time to make money through original mortgages, and JPMorgan is positioned to benefit.

JPM Revenue Quarterly Chart JPM Revenue Quarterly data by YCharts
WFC Chart WFC data by YCharts

The second bank in focus is Wells Fargo ( WFC)

Wells Fargo is a diversified financial services company providing banking, insurance, investments, mortgage and consumer finance services across North America, as well as internationally. Wells Fargo trades an average of 21 million shares a day with a market cap of $218 billion.

52-Week Range: $31.25 to $41.96

Price-to-Book: 1.5

A strong second-quarter earnings growth report is expected before the market opens on Friday, July 12. The consensus mean is 92 cents a share, an increase of 10 cents (10.9%) from 82 cents in the corresponding quarter last year. The lowest analyst estimate before this report is 89 cents a share, and the highest is 96 cents. Along with beating last year's results, this quarter is expected to be in line with last quarter's results.

I remain upbeat and this bank was included on my list of top five dividend-paying stocks to own for 2013. More recently, I wrote why Wells Fargo remains a buy and investors should add to their positions during dips

Wells Fargo's investors receive a dividend yield of 2.9% from a payout of about 30% after three rate hikes in as many years. The stock appreciated 24% in the last year, and the average analyst target price target is $41.77.

My 12-month price target is $48, and I support my thesis with a low-earnings-multiple premium, an improving housing market, higher expected interest spreads and expected dividend increases.

WFC Revenue Quarterly Chart WFC Revenue Quarterly data by YCharts

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Robert Weinstein currently blogs, mentors traders, and writes several weekly columns in Rocco Pendola's Option Investing newsletter from his home in northern Wisconsin. Robert tends to focus on the psychological importance of goals, risk mitigation, emotion, and relatively short term market exposure. With nearly 30 years of studying and investing experience, Robert has experienced the many ups and downs in the financial markets and uses the knowledge gained to maintain balance. Robert believes the best way to make money investing is to avoid losing it. The best way to avoid losing is to know what emotional traps lay in the path of investors and learning how to avoid them. Robert is a voracious reader of financial related books often completing more than one book a week while not trading or writing. Robert contributes to his blog at paid2trade.com on a regular basis with an emphasis on studying behavior finance.


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