I was looking into purchasing some 10 year bonds and stumbled across an article in Fortune that talked about bank stocks. Banks are very cheap at the moment and some of them are paying dividends that are as good, if not better than the 10 year bond. The 10 year pays about 5% and the income is taxes at normal rates. Today, Bank of America yields 4.5% and the company is expected to raise its dividend to 5.1% later this month. Other banks have similar profiles. Dividends are also taxed at a lower rate, making the net return higher than 10 year bonds.
On top of that, bank stocks have very low PEs and are relatively inexpensive. The public has broadly discounted the banking sector because of the sub-prime loan meltdown but companies like Citibank and Bank of America do not have wide exposure to this market. If they did, they long ago packaged the loans and removed the risk from their balance sheets.
A great dividend, favorable tax treatment, and upside potential make banking stocks a decent alternative to a 10 year bond.
Sponsor Updates and Offers
|
|
|
Related Articles:
Implied Probability of Interest Rate Rise Holds Steady, but bond yields Fall as Markets Tank by soczie - Jul 09, 2008
Dividend Chasers Should Think Twice: Corporate Bonds May Make More Sense by JRodgers - Dec 20, 2008
The Risks of Buying Bonds by Tom Davis - Mar 11, 2008
Citibank Launches new Amex Card for Smith Barney and Private Clients by PhilR - Jun 24, 2007
Citibank Offering 2.5% APY on Money Market in Boston by PhilR - Apr 03, 2009
Citibank and Wells Fargo Trust Preferred Securities May Offer Value Here by soczie - Feb 21, 2009
Which will fail first - Lehman, Wachovia, Merrill or Citibank? by JRodgers - Jul 15, 2008
Throwing Good Money after Bad: Bank of America Buys Countrywide by JRodgers - Jan 11, 2008
Bank of America to Cut Countrywide Bid? by JRodgers - May 06, 2008.
Add to reading list
