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Thursday, June 12, 2008

* Review of Bank Stock Holdings

It is good to periodically take a look at your holdings and the various sectors that you are invested in. My single largest sector is financials. It currently makes up 11% of my total investment portfolio. I like to limit any individual sector to 10%, thus I am slightly over-allocated.


Bank stocks make up a significant piece of my financials. For most of the year I held these banking stocks:
Bank of America Corporation (BAC) -20.9%
BB&T Corporation (BBT) -2.5%
M&T Bank Corporation (MTB) +3.7%
Royal Bank of Canada (RY) -0.9%
SunTrust Banks, Inc. (STI) -20.1%
U.S. Bancorp (USB) +7.9%
Wachovia Corporation (WB) -30.7% -Sold 4/15/2008
The percentages above represent my year-to-date return (through 6/4/2008) for the period I held the stock. Not a pretty picture, for the most part. USB has been the lone bright spot.

In my article "Time is My Friend", I noted that I have too many bank stocks at six (seven with WB in my IRA). It was my desire reduce my bank holdings down to three to four stocks. Later the same month in my "State of the Dividend Address", I identified STI and MTB as my two weakest banks and moved them to "On The Shelf". I opted to wait and let the weakest bank stocks identify themselves over time before selling.

Fast forward to about a month and WB cuts its dividend. As per my policy, I immediately sell the stock. One down. Recently, MTB chose to leave its dividend flat at $0.70 and placed one foot in the grave. In an earlier stock analysis of BAC, I speculated it too would hold its dividend flat in September. As for the others:
  • BBT: July is its traditional month to raise its dividend. So I will know something soon.
  • RY: Historically RY has raised dividends twice a year. It missed the first round in 2008. The August dividend of C$0.50 will be RY's 4th, so November's dividend will be closely watched by many.
  • STI: Earlier this year STI raised its dividend 5.5% to $0.77/share. I was not happy at the time since its previous growth rate was 10%. In retrospect, I may be glad I only put it on the shelf and didn't sell it as I was so tempted to do.
  • USB: Increased its dividend in December 2007 and I believe it is the strongest bank stock that I am holding.
I am currently invested in six banks. I will be very surprised if I can make the same statement on December 31, 2008. Then again, I have been surprised several times over the last 18 months.
At time of this writing, I owned BAC, BBT, MTB, RY, STI and USB.

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