While I’ve dispensed with the plan to make a dividend stock pick every week, I still plan to highlight one that appeals to me from time to time.
While the yield on the one financial stock in my portfolio, UBS, is attractive, the stock has performed below expectations since I bought it and hasn’t rebounded yet. I’m not planning to dump it (it’s one of my few international holdings), but I have started looking at domestic financial firms.
The U.S. banking system remains much larger and more diverse than most. And regional player KeyCorp recently announced a dividend hike that will push its payout ratio above 4%. The stock closed at $17.45 a share on July 19, and it trades at just over 10-times earnings, which in today’s overbought market seems attractive. According to Barron’s, research firm NewConsructs considers KeyCorp’s payout rate to be very safe. In short, KeyCorp is definitely the type of firm I’d consider adding to my portfolio to boost dividend income.
The stock is down year-over-year, reflecting fears about what falling interest rates might do to the financial sector. The company’s “free cash flow” is well more than twice it’s dividend payout, according to Barron’s.
The Cleveland-based bank reported a slight decline in earnings during the first quarter, but net interest income was up from the year earlier period. Fee income declined due to lower investment banking results. Overall, the payout rate is high but with less risk of a dividend cut than is typically the case with banks with dividend yields north of 4%.
Dividend Pick of the Week 