Relative to its two rivals, Wells Fargo & Co (NYSE:WFC) also has better fundamentals and a superior balance sheet. The company’s $1 annual dividend provides investors with a yield of about 2.6 percent. For comparison, Citigroup Inc. (NYSE:C) sports a laughable yield of .1 percent. With its lower share price, Bank of America’s identical $0.04 dividend is good for a yield of roughly .3 percent. Bank of America Corp (NYSE:BAC) also has an out-of-control debt load of more than $645 billion to balance its cash hoard of around $525 billion. Although Citigroup has more cash than debt, its $557 billion debt load is still too large for comfort. Wells Fargo’s $184 billion debt burden looks positively responsible by comparison.
Buffett’s recent announcement that Berkshire had increased the value of its stake in Wells Fargo to more than 8 percent of the company shocked even the most bullish Buffett-watchers. Since 2010, Wells Fargo & Co (NYSE:WFC) has been one of a handful of companies that Buffett has touted and is commonly cited as one of Berkshire’s “big four” investments. At Wells Fargo’s current valuation, Buffett’s stake is worth more than $16 billion.
Long-Term Company and Industry Outlook
The news that Citigroup has been ordered to pay out another $730 million to bondholders who lost significant amounts of money during the financial crisis serves as a reminder that major banks’ woes have not yet subsided. However, Wells Fargo looks to be in far better shape than either Bank of America Corp (NYSE:BAC) or Citigroup Inc. (NYSE:C). At this point, it seems likely that the company will continue to consolidate its competitive advantage and enjoy healthy growth during the coming quarters.
For value investors, the choice is clear: Wells Fargo & Co (NYSE:WFC)’s superior fundamentals and strong finances make it an attractive pick relative to its rivals. It does not hurt that the company’s stock has gained more than 50 percent during the past 18 months. With all of these tailwinds, Wells Fargo offers a tantalizing opportunity for investors looking to get back into large-cap banks after a long hiatus.
The article The Bank On Top Of The Pack originally appeared on Fool.com and is written by Mike Thiessen.
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