Mike Mayo Says ‘Move Over Utilities’ as Banks Ace Stress Tests
- Banks’ dividend yields are close to those for utilities
- But the stocks trade for less on price-to-earnings basis
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Mike Mayo says it’s time for utility stocks to make way, as successful Federal Reserve stress tests and large dividend increases are adding to the idea that big banks are stable.
“Banks are directionally moving towards utilities, especially with a pro forma dividend yield (3%) that is close to the yield of the S&P Utilities ETF (3.1%), while having similar ROEs,” the Wells Fargo bank analyst wrote in a note. The opportunity, Mayo said, is that “banks trade at only about half the P/E (11x vs 21x).”