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Should You Keep KeyCorp (KEY) on Your Radar for Solid Dividend?
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Amid the current operating backdrop, with the banking industry facing turmoil due to deposit outflows and expectations of economic slowdown/recession, solid dividend-yielding stocks are highly desirable. Today, we are discussing one such stock, KeyCorp (KEY - Free Report) .
Headquartered in Cleveland, OH, KEY is a diversified financial service provider, operating a widespread network of more than 950 branches. The bank has been increasing its quarterly dividend on a regular basis, with the last hike of 5.1% to 20.5 cents per share in November 2022.
Over the past five years, KeyCorp increased the dividend four times, with an annualized dividend growth rate of 5.9%. Considering the last day’s closing price of $11.02, the company’s dividend yield currently stands at 7.44%. This is impressive compared with the industry average of 4.32% and attractive for income investors as it represents a steady income stream.
So, is the KeyCorp stock worth keeping an eye on to earn a robust dividend yield? Let’s check out the company’s fundamentals to understand risk and rewards. This will help us make a proper investment decision.
KeyCorp has been witnessing consistent organic growth. Though tax-equivalent revenues declined in 2019 and 2022, the same witnessed a compound annual growth rate (CAGR) of 3.1% over the last six years (2017-2022). The rise was mainly driven by solid loan and deposit balances. During the five-year period ended 2022, loans witnessed a CAGR of 7.5% and deposits saw a CAGR of 7.4%.
Supported by steady loan demand and higher rates, along with KEY’s efforts to strengthen fee income, its top line is expected to keep improving. Though we project total revenues to decline 4.2% this year, it will rebound and grow 2.5% and 3.4% in 2024 and 2025, respectively. We project total net loans to grow 2% in 2023 and total deposits to rise 1%.
With the Federal Reserve expected to keep interest rates high in the near term to control inflation, KeyCorp’s net interest margin (NIM) is likely to continue growing in the near term (though the pace of growth will slow down a bit on higher funding costs). We anticipate NIM to be 2.47%, 2.44% and 2.33% in 2023, 2024 and 2025, respectively.
Additionally, KeyCorp’s inorganic expansion efforts are impressive and have been supporting fee income growth. Last year, the company acquired GradFin, which will strengthen its digital offering capabilities. In 2021, it acquired a B2B-focused digital platform, XUP Payments and a data analytics-driven consultancy firm, AQN Strategies LLC.
These, along with several past buyouts/expansion initiatives, are expected to strengthen its product suites and market share, as well as help diversify revenues. Also, as demand for digital banking services continues to rise, the company has been consolidating its branch network, with management looking for opportunities to right-size its footprint.
Despite near-term headwinds that include rising expenses, substantial exposure to commercial loans and a tough operating environment, KEY is fundamentally solid. So far this year, shares of this Zacks Rank #3 (Hold) company have plunged 36.7% compared with the industry’s fall of 6.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research
So, income investors should watch KeyCorp stock as it will help generate robust returns over time.
Other Major Bank Stocks to Watch
A couple of major bank stocks like Truist Financial (TFC - Free Report) and U.S. Bancorp (USB - Free Report) are worth a look as these have robust dividend yields.
Considering the last day’s closing price, Truist Financial’s dividend yield currently stands at 6.29%. Over the past six months, shares of TFC have lost 20.4%.
Based on the last day’s closing price, U.S. Bancorp’s dividend yield currently stands at 5.88%. Over the past six months, shares of USB have lost 22.9%.
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Should You Keep KeyCorp (KEY) on Your Radar for Solid Dividend?
Amid the current operating backdrop, with the banking industry facing turmoil due to deposit outflows and expectations of economic slowdown/recession, solid dividend-yielding stocks are highly desirable. Today, we are discussing one such stock, KeyCorp (KEY - Free Report) .
Headquartered in Cleveland, OH, KEY is a diversified financial service provider, operating a widespread network of more than 950 branches. The bank has been increasing its quarterly dividend on a regular basis, with the last hike of 5.1% to 20.5 cents per share in November 2022.
Over the past five years, KeyCorp increased the dividend four times, with an annualized dividend growth rate of 5.9%. Considering the last day’s closing price of $11.02, the company’s dividend yield currently stands at 7.44%. This is impressive compared with the industry average of 4.32% and attractive for income investors as it represents a steady income stream.
KeyCorp Dividend Yield (TTM)
KeyCorp dividend-yield-ttm | KeyCorp Quote
So, is the KeyCorp stock worth keeping an eye on to earn a robust dividend yield? Let’s check out the company’s fundamentals to understand risk and rewards. This will help us make a proper investment decision.
KeyCorp has been witnessing consistent organic growth. Though tax-equivalent revenues declined in 2019 and 2022, the same witnessed a compound annual growth rate (CAGR) of 3.1% over the last six years (2017-2022). The rise was mainly driven by solid loan and deposit balances. During the five-year period ended 2022, loans witnessed a CAGR of 7.5% and deposits saw a CAGR of 7.4%.
Supported by steady loan demand and higher rates, along with KEY’s efforts to strengthen fee income, its top line is expected to keep improving. Though we project total revenues to decline 4.2% this year, it will rebound and grow 2.5% and 3.4% in 2024 and 2025, respectively. We project total net loans to grow 2% in 2023 and total deposits to rise 1%.
With the Federal Reserve expected to keep interest rates high in the near term to control inflation, KeyCorp’s net interest margin (NIM) is likely to continue growing in the near term (though the pace of growth will slow down a bit on higher funding costs). We anticipate NIM to be 2.47%, 2.44% and 2.33% in 2023, 2024 and 2025, respectively.
Additionally, KeyCorp’s inorganic expansion efforts are impressive and have been supporting fee income growth. Last year, the company acquired GradFin, which will strengthen its digital offering capabilities. In 2021, it acquired a B2B-focused digital platform, XUP Payments and a data analytics-driven consultancy firm, AQN Strategies LLC.
These, along with several past buyouts/expansion initiatives, are expected to strengthen its product suites and market share, as well as help diversify revenues. Also, as demand for digital banking services continues to rise, the company has been consolidating its branch network, with management looking for opportunities to right-size its footprint.
Despite near-term headwinds that include rising expenses, substantial exposure to commercial loans and a tough operating environment, KEY is fundamentally solid. So far this year, shares of this Zacks Rank #3 (Hold) company have plunged 36.7% compared with the industry’s fall of 6.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research
So, income investors should watch KeyCorp stock as it will help generate robust returns over time.
Other Major Bank Stocks to Watch
A couple of major bank stocks like Truist Financial (TFC - Free Report) and U.S. Bancorp (USB - Free Report) are worth a look as these have robust dividend yields.
Considering the last day’s closing price, Truist Financial’s dividend yield currently stands at 6.29%. Over the past six months, shares of TFC have lost 20.4%.
Based on the last day’s closing price, U.S. Bancorp’s dividend yield currently stands at 5.88%. Over the past six months, shares of USB have lost 22.9%.