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Should You Watch Regions Financial (RF) for Solid Dividend?

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Amid the current tough operating backdrop (expectations of an economic slowdown/recession), the financial sector is deteriorating.  Hence, solid dividend-yielding stocks should be on investors’ radar. Today, we are discussing one such stock, Regions Financial Corporation (RF - Free Report) .

This Birmingham, AL-based financial holding company, provides retail and commercial, and mortgage banking. Other financial services in the asset management, wealth management, securities brokerage, trust services, mergers and acquisitions advisory services, and other specialty financing are also delivered by RF.

It has been increasing its quarterly dividend regularly, with the latest hike of 17.6% to 20 cents per share announced in July 2022. Over the past five years, the company increased its dividend four times, with an annualized dividend growth rate of 10.34%.

Considering last day’s closing price of $18.12 per share, RF’s current dividend yield is 4.42%. This is impressive compared with the industry’s average of 2.66% and attractive for investors as it represents a steady income stream.


Is the RF stock worth a look to earn a high dividend yield? Let’s check the company fundamentals to understand its risks and rewards for making a proper investment decision.

Regions Financial’s liquidity sources aggregated $53.8 billion as of Mar 31, 2023, whereas its long-term borrowings were $2.31 billion. Such higher level of liquidity will likely aid sustainable capital deployment activities in the upcoming period.

RF’s senior-unsecured debt enjoys an investment-grade credit rating of BBB+ from Standard & Poor’s, Baa1 from Moody’s and A- from Fitch, rendering access to debt at attractive rates. Also, the company’s strong liquidity profile makes it less likely to default on interest and debt repayments if the economic situation worsens.

Regions Financial has diversified business and expanded its operations through investments in varied product offerings and acquisitions. In 2021, it acquired Clearsight, Sabal Capital and EnerBank USA, diversifying its revenue sources. 

Organic growth remains a key strength at Regions Financial, with net interest income (NII) rising over the years. The company’s asset sensitive balance sheet, high interest rates and strong lending pipeline are expected to support its NII and net interest margin in the upcoming period. However, a rise in deposit costs is likely to affect NII in the near term.

RF’s balance sheet growth will be supported by an increase in loans. Over the past three years (ended 2022), the company’s total loans witnessed a CAGR of 5.2% with the uptrend continuing in first-quarter 2023. Management expects total loans to grow around 4% in 2023.

Further, Regions Financial continues its investments in talent and technology to support growth. It has been making efforts to increase its digital or virtual sales, witnessing significant improvement both in the lending and deposit spaces.

On the flip side, Regions Financial’s bottom line continues to suffer from rising costs. Also, pressure on mortgage income due to high rates and a lack of diversification in loan portfolio are concerning.

Over the past three months, shares of RF have lost 4.5% compared with the industry's fall of 4.8%.

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Image Source: Zacks Investment Research

RF currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A couple of other finance stocks, like Associated Banc-Corp (ASB - 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 of $17.06 per share, ASB’s current dividend yield is 4.92%. Over the past six months, the stock has declined 24.6%.

Based on the last day’s closing price of $16.78 per share, IVZ’s present dividend yield is 4.77%. Over the past six months, the stock has lost 9.6%.

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