The company is based in Spain and has additional operations in Portugal, Mexico, South America, Puerto Rico and the U.S., and Wall Street expects earnings to grow by 7% a year over the next five years. Like Sumitomo Mitsui, Banco Bilbao trades very cheaply at 10.6 times forward EPS and its diversified international exposure actually endears it to us a bit more. David Dreman also holds a small position here (see the value investor’s full equity portfolio), and Two Sigma Advisors and Peak6 Capital were buying in the last round of 13F filings. On the whole, this is another financial play that offers a bit over everything: value, income and growth.
Banco Bradesco SA (ADR) (NYSE:BBD), additionally, continues the string of financial stocks that offer good yield with the potential for a dividend boost that happen to be based overseas. Banco Bradesco, which is located in Brazil, is the second largest private bank in the country. While it may be most widely known for its introduction of ATM biometric authentication systems to the Brazilian market, Banco Bradesco is no slouch in the growth department.
The bank has grown its revenues by 17% a year over the past half-decade, and earnings have expanded by 7.5% a year over this time. On the whole, sell-side analysts expect annual earnings growth to accelerate to almost 10% over the next five years, and shares are actually cheaper than Banco Bilbao and Sumitomo at less than 10 times forward EPS. Although a finance-focused investor seeking true international exposure might be best looking elsewhere, Banco Bradesco’s 4% dividend yield at a payout ratio near 33% make it one of the best dividend stocks in this space.
Royal Bank of Canada
Royal Bank of Canada (USA) (NYSE:RY) is another large-cap financial stock that offers one of the sector’s lowest payout ratios (46%) with a dividend yield of 3.9%. This particular bank has nearly doubled its quarterly dividend since 2006, and it has paid shareholders in 16 consecutive quarters.
This streak isn’t as long as that of the aforementioned Banco Bilbao, for example, but Royal Bank of Canada is almost equally as cheap at 11 times forward EPS and a paltry price-to-cash multiple of 0.3. It’s possible that this bank offers the best bottom line growth prospects of all four banks discussed here due to its exceptionally strong personal/commercial banking and wealth management businesses, in addition to Royal Bank of Canada’s ability to maintain high quality loan credit notwithstanding a national housing market that “teeters on the brink,” according to some experts. We’ll continue to watch this stock very closely, in addition to its three international peers discussed above.