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Is Fifth Third (FITB) Stock Worth a Watch for Solid Dividend?
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Amid the ongoing regional banking crisis and probable recession in the near term, investors must keep an eye on high dividend-yielding stocks. One such stock is Fifth Third Bancorp (FITB - Free Report) .
This Cincinnati, OH-based bank provides a range of services through 1,069 full-service banking centers in 11 states throughout the Midwestern and Southeastern regions of the United States. FITB has been increasing its quarterly dividend on a regular basis. Over the past five years, the company increased its dividend six times, with an annualized dividend growth rate of 12.1%.
On Jun 13, Fifth Third announced a cash dividend of 33 cents per share for the second quarter of 2023. The dividend will be paid on Jul 17, 2023, to shareholders of record as of Jun 30, 2023.
Considering the last day’s closing price of $34.35, Fifth Third’s dividend yield currently stands at 4.9%. This is decent compared with the industry average of 4.2% and attractive for income investors as it represents a steady income stream.
Should you keep an eye on FITB to earn a high dividend yield? Let’s check out the company’s fundamentals to understand the risk and rewards. This will help us make a proper investment decision.
Fifth Third is well-positioned to continue its organic growth. Total loan and lease balance witnessed a compound annual growth rate (CAGR) of 6.1% over the five-year period ending 2022. The rising trend continued in the first quarter of 2023.
Its deposits recorded a CAGR of 10.7% over the same time period, with the deposit balance declining slightly in 2022 and first-quarter 2023. Nonetheless, as the year progresses, management expects deposits to be stable or grow from the first-quarter average level, supported by strong customer acquisition trends.
In addition to strong organic growth, Fifth Third has expanded its fee-income base over the years through strategic acquisitions. The company completed the acquisition of Big Data Healthcare and the embedded payment platform, Rize Money this May.
The acquisition of Big Data Healthcare adds national healthcare revenue cycle capabilities, thereby advancing its digital payments and managed services offerings. Previously, it also acquired Dividend Finance, Provide and Coker Capital to expand its commercial verticals, which are expected to drive revenue growth in the upcoming quarters.
Fifth Third has a strong balance sheet. As of Mar 31, 2023, the company had long-term debt of $12.8 billion, which declined sequentially. Its first-quarter 2023 times interest earned ratio of 5.8 declined from the prior quarter. Nonetheless, total liquidity stood at $100 billion as of the same date. Therefore, with a strong liquidity position and manageable debt, Fifth Third is less likely to default on interest and debt repayments in the near term, even if the economic situation worsens.
In anticipation of strong loan growth and Dividend Finance transaction, the bank paused share repurchase until the second quarter of 2023. Nonetheless, along with deploying capital into organic growth initiatives and strategic non-bank opportunities, the company aims to execute share repurchases with excess capital.
In the first quarter, Fifth Third reported a Common Equity Tier 1 ratio of 9.25%. This offers room for enhanced capital deployment plans and will enhance shareholder value in the long term.
Again, FITB’s trailing 12-month return on equity (ROE) reflects its superiority in utilizing shareholders' funds. The company's ROE of 16.28% compares favorably with the industry's 12.37%.
Hence, despite near-term headwinds like rising non-interest expenses and greater exposure to commercial loans, FITB stock is fundamentally solid. In the past 30 days, shares of FITB have gained 5.9% compared with the industry’s rise of 3.2%.
A couple of other finance stocks like Ares Capital Corporation (ARCC - Free Report) and Invesco Ltd. (IVZ - Free Report) are worth a look as these too have robust dividend yields.
Considering the last day’s closing price, Ares Capital’s dividend yield currently stands at 10%. Over the past six months, shares of ARCC have gained 3.7%.
Based on the last day’s closing price, Invesco’s dividend yield currently stands at 5%. Over the past six months, shares of IVZ have lost 6.7%.
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Is Fifth Third (FITB) Stock Worth a Watch for Solid Dividend?
Amid the ongoing regional banking crisis and probable recession in the near term, investors must keep an eye on high dividend-yielding stocks. One such stock is Fifth Third Bancorp (FITB - Free Report) .
This Cincinnati, OH-based bank provides a range of services through 1,069 full-service banking centers in 11 states throughout the Midwestern and Southeastern regions of the United States. FITB has been increasing its quarterly dividend on a regular basis. Over the past five years, the company increased its dividend six times, with an annualized dividend growth rate of 12.1%.
On Jun 13, Fifth Third announced a cash dividend of 33 cents per share for the second quarter of 2023. The dividend will be paid on Jul 17, 2023, to shareholders of record as of Jun 30, 2023.
Considering the last day’s closing price of $34.35, Fifth Third’s dividend yield currently stands at 4.9%. This is decent compared with the industry average of 4.2% and attractive for income investors as it represents a steady income stream.
Fifth Third Bancorp Dividend Yield (TTM)
Fifth Third Bancorp dividend-yield-ttm | Fifth Third Bancorp Quote
Should you keep an eye on FITB to earn a high dividend yield? Let’s check out the company’s fundamentals to understand the risk and rewards. This will help us make a proper investment decision.
Fifth Third is well-positioned to continue its organic growth. Total loan and lease balance witnessed a compound annual growth rate (CAGR) of 6.1% over the five-year period ending 2022. The rising trend continued in the first quarter of 2023.
Its deposits recorded a CAGR of 10.7% over the same time period, with the deposit balance declining slightly in 2022 and first-quarter 2023. Nonetheless, as the year progresses, management expects deposits to be stable or grow from the first-quarter average level, supported by strong customer acquisition trends.
In addition to strong organic growth, Fifth Third has expanded its fee-income base over the years through strategic acquisitions. The company completed the acquisition of Big Data Healthcare and the embedded payment platform, Rize Money this May.
The acquisition of Big Data Healthcare adds national healthcare revenue cycle capabilities, thereby advancing its digital payments and managed services offerings. Previously, it also acquired Dividend Finance, Provide and Coker Capital to expand its commercial verticals, which are expected to drive revenue growth in the upcoming quarters.
Fifth Third has a strong balance sheet. As of Mar 31, 2023, the company had long-term debt of $12.8 billion, which declined sequentially. Its first-quarter 2023 times interest earned ratio of 5.8 declined from the prior quarter. Nonetheless, total liquidity stood at $100 billion as of the same date. Therefore, with a strong liquidity position and manageable debt, Fifth Third is less likely to default on interest and debt repayments in the near term, even if the economic situation worsens.
In anticipation of strong loan growth and Dividend Finance transaction, the bank paused share repurchase until the second quarter of 2023. Nonetheless, along with deploying capital into organic growth initiatives and strategic non-bank opportunities, the company aims to execute share repurchases with excess capital.
In the first quarter, Fifth Third reported a Common Equity Tier 1 ratio of 9.25%. This offers room for enhanced capital deployment plans and will enhance shareholder value in the long term.
Again, FITB’s trailing 12-month return on equity (ROE) reflects its superiority in utilizing shareholders' funds. The company's ROE of 16.28% compares favorably with the industry's 12.37%.
Hence, despite near-term headwinds like rising non-interest expenses and greater exposure to commercial loans, FITB stock is fundamentally solid. In the past 30 days, shares of FITB have gained 5.9% compared with the industry’s rise of 3.2%.
Image Source: Zacks Investment Research
So, income investors should watch this Zacks Rank #3 (Hold) stock, as this will help generate robust returns over time. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Finance Stocks With Solid Dividends
A couple of other finance stocks like Ares Capital Corporation (ARCC - Free Report) and Invesco Ltd. (IVZ - Free Report) are worth a look as these too have robust dividend yields.
Considering the last day’s closing price, Ares Capital’s dividend yield currently stands at 10%. Over the past six months, shares of ARCC have gained 3.7%.
Based on the last day’s closing price, Invesco’s dividend yield currently stands at 5%. Over the past six months, shares of IVZ have lost 6.7%.