Compass Financial Advisors

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Let's Call It A Comeback

 View from the Observation Deck

  1. Today's blog post on bank dividends revisits the one we did last June (Click here). 
  2. The main difference between today's chart and last June's is that the estimated dividend payments for 2018-2019 have been raised, particularly the projection for 2019.  
  3. Since the biggest banking institutions in the U.S. were at the epicenter of the 2008-2009 financial crisis, investors should not be surprised that the recovery has been a bit of a slow grind to this point, in our opinion. 
  4. As indicated in the chart, the bottom in annual dividend distributions for the S&P 500 Banks Index was $1.34 in 2010. The recovery in dividend payments is now in its eighth year. Even if the $10.43 per share dividend for 2020 proves accurate, it would still stand 28.32% below 2007's payout.   
  5. As of the close of trading on 5/7/18, the S&P 500 Banks Index stood 19.42% below its all-time high set on 2/20/07, according to Bloomberg. 
  6. The outlook for earnings is encouraging. As of 5/4/18, Bloomberg's consensus earnings growth rate estimates for the S&P 500 Banks Index for 2018, 2019 and 2020 were 23.3%, 11.6% and 11.7%, respectively.
  7. The recovery in the banking sector remains a work in progress, and therein lies the opportunity for investors, in our opinion.  
  8. This chart is for illustrative purposes only and not indicative of any actual investment. There can be no assurance that any of the projections cited will occur. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Banks Index is capitalization-weighted and comprised of 18 constituents.

Download a PDF of this post, please click here.


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Latest Market News

 Stocks fell for the week as investors grappled with higher bond yields, political risks around the globe, trade tensions and higher energy prices. The real estate and utilities sectors, which tend to be bond proxies due to their high dividend yields, lost over 2% for the week. By contrast, the materials and energy sectors posted the biggest gains as investors are starting to price in higher inflation expectations. In economic news, retail sales rose 0.3% in April, in-line with forecasts, as higher paychecks from tax-cuts offset rising fuel costs. In stock news, both Walmart Inc.

 Treasury prices dropped moderately over the course of the week on strong economic data and speculation that both the Federal Reserve and European Central Bank may raise interest rates more quickly than previously expected. On Tuesday, April Advance Retail Sales were solid while March sales figures were revised to 0.8%, and May Empire Manufacturing was higher than expected, causing a risk-on environment which led to a significant drop in Treasury prices. It was also reported on Tuesday that the U.S.

 View from the Observation Deck  

Securities offered through Harbour Investments, Inc.,
member FINRA/SIPC.

Investment Advisory Services offered through
Compass Financial Advisors, LLC,
a registered Advisor. 
Compass Financial Advisors, LLC &
Harbour Investments, Inc.
are separate entities.

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