One of my mantras about successful stock investing is that it doesn’t have to be complicated. You don’t have to be a day trader or a rocket scientist, search out unknown fast-growing companies, or have inside information about upcoming M&A deals in order to grow your principal and meet your financial goals. Stock investing can be as simple as buying shares of Alphabet (GOOGL) and holding them long term!
But diversification is important, too. And that means it would be wise to own several stocks in a variety of sectors, and not just GOOGL.
Let’s revisit another no-brainer, successful stock investment, a bank stock that you can buy today while prices are low during the 2018 stock market correction. The company is Zions Bancorporation (ZION).
This Bank Stock Has Nearly Doubled Since I Recommended It
I first told you about ZION on August 4, 2016, and the stock proceeded to rise 60% by year end. Then I gave you an update on February 9, 2017, saying, “I think this undervalued stock will have another very good year in 2017. Buy ZION now.”
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At this point, ZION has delivered a total return of 98.6% since my first recommendation in August 2016. If you’re one of the lucky investors who bought ZION at that time, I have two words for you: “Don’t sell!” That’s because this wonderfully strong bank stock is still undervalued.
Zions Bancorporation (ZION – yield 1.5%) is a bank holding company that owns eight commercial banks with $65 billion in assets, operating in 11 states throughout the western U.S., including California Bank & Trust. The company is based in Salt Lake City, Utah.
Many recent economic and regulatory changes are boosting banks’ profitability. Rising interest rates, lower income tax rates, strong U.S. economic growth and pending reductions in expensive regulatory requirements are all helping banks better serve their customers, communities and shareholders.
ZION achieved a 43.7% increase in earnings per share (EPS) in 2017. (For perspective, I consider any EPS growth rate over 15% to be extremely attractive.) Wall Street’s consensus estimate points toward EPS growing another 27.6% in 2018.
The 2018 price/earnings ratio (P/E) is 14.4, much lower than the earnings growth rate, and lower than it was a year ago.
ZION is a mid-cap stock within the S&P 500 index, with a market capitalization of $10.4 billion—certainly small enough to be gobbled up by a larger bank in a buyout deal. Institutions own 94% of ZION shares; a bullish sign of professional confidence in the bank stock.
Last summer, Zion announced that it would increase its quarterly dividend by four cents per share, in each of the next four quarters. It’s highly unusual for any company to increase its dividend payout more than once per year! The payout has since risen from $0.08 to $0.12 to $0.16 to $0.20, and is on schedule to rise to $0.24 with this year’s second quarter payment in May. The current yield is 1.5%, and will be 1.8% after the May increase, presuming a stable share price.
Good Time to Buy ZION
Despite this year’s stock market correction, ZION’s share price has shown much more strength than the broader market. In late March, ZION briefly pulled back from a recent high of 57 down to price support in the low 50’s. This is an excellent time to buy ZION, before it resumes its upward climb.
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