Equity investors looking for dividend returns this year may want to look to the banking industry, according to Second Curve Capital LLC’s Thomas Brown.
“One of the key positives for banks in 2012, big and small, will be significant increases in common-stock dividends,” Brown, chief executive officer and founder of Second Curve in New York, said today in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt.
Brown cited U.S. Bancorp (USB), the nation’s fifth-largest lender by deposits. The Minneapolis bank reported today a 39 percent increase in fourth-quarter profit and said raising its 50-cent yearly dividend is a priority.
The Federal Reserve has said it will approve dividend increases and other capital distributions for banks that demonstrate sufficient financial strength to operate under stressed markets.
U.S. Bancorp and Commerce Bancshares Inc. of Kansas City, Missouri, are the two lenders in the 24-company KBW Bank Index (BKX) that climbed in 2011, with U.S. Bancorp rising 0.3 percent. U.S. Bancorp has rallied 7.4 percent this month.
While Brown said U.S. Bancorp and Wells Fargo & Co. are the best-performing large banks, he advised looking toward smaller, regional lenders.
“I like to own the banks that had problems, that are getting better,” said Brown, whose firm manages $200 million in assets. “It is much easier to control the business in these small banks.”
Mercantile Bank Corp. (MBWM) of Grand Rapids, Michigan, and Citizens Republic Bancorp Inc. of Flint, Michigan, are in a “strong recovery” mode, according to Brown.
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