Welcome to Episode #67 of the Zacks Market Edge Podcast.

Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.

In this episode, Tracey is joined by Neena Mishra, Editor of Zacks Income Investor, which specializes in dividend paying stocks. One of her favorite industries right now are the financials, specifically the community banks.

Ten years ago, banks were the go-to investment for retirees and investors looking for yield. Many of the big banks paid dividends yielding 4% to 5%. But then the Great Recession hit.

Banks that survived the chaos ended up cutting their dividends or eliminating them entirely. The once “go-to” industry now was off the investing radar.

But that was then and this is now.

With the Fed raising rates in December 2016 and expected to possibly raise rates another 3 times in 2017, suddenly the community banks are seeing earnings growth.

Some banks have brought back their dividends and others, that never got rid of them, have been raising them.

There are over 6,000 banks in the United States. Many of them trade publicly on various exchanges. How do you know which banks to buy?

Tracey admits she had never heard of several of Neena’s top choices. That’s the problem with the community banks. A lot of them are still very local. But that doesn’t mean you should pass by this investing opportunity.

These Banks Pay Solid Dividends and Have Good Fundamentals

PacWest Bancorp (PACW) is a California bank with $21 billion in assets. It pays one of the higher dividends, with a yield of 3.7%.

Washington Trust Bancorp (WASH), founded in 1800, is the oldest community bank in the United States. It yields 2.8%. It has raised its dividend in 23 of the last 24 years. That’s an impressive record for any company, let alone a bank which went through the Great Recession.

Sandy Spring (SASR) serves the hot DC, Maryland and Northern Virginia market. It has a good record of increasing its dividend with 6 increases over the past 16 quarters. It yields 2.8%.

WesBanco (WSBC) dates all the way back to 1870 in West Virginia. It now spans 5 states including Indiana, Kentucky, Ohio, Pennsylvania as well as its home market of West Virginia. It has a $1.8 billion market cap and pays a 2.3% yield.

But what if there are simply too many choices?

You won’t get that great of a yield, but you can buy the First Trust Community Bank ETF (QABA), which excludes the top 50 US banks so it is filled with many smaller regional and community banks. It is only yielding 1.1% as many of the smaller banks still aren’t able to pay a dividend.

Still, Tracey and Neena are both very excited about this industry. Despite the big gain in many banking shares since the November 2016 election, both think there is room to run.

Investors have turned their back on the banks for nearly a decade. The Fed rate increases should provide a much-needed boost to earnings.

What else should you know about one of the hottest industries of 2017?

Tune into this week’s podcast to find out.

Pacific West Bancorp: https://www.zacks.com/stock/quote/PACW?cid=cs-soundcloud-ft-pod

Washington Trust Bancorp: https://www.zacks.com/stock/quote/WASH?cid=cs-soundcloud-ft-pod

Sandy Spring: https://www.zacks.com/stock/quote/SASR?cid=cs-soundcloud-ft-pod

WesBanco: https://www.zacks.com/stock/quote/WSBC?cid=cs-soundcloud-ft-pod

First Trust NASDAQ ABA Community Bank Index Fund: https://www.zacks.com/funds/etf/QABA/profile?cid=cs-soundcloud-ft-pod

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