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Banking Bargains

09/04/2015 7:00 am EST


Mark Skousen

Editor, Forecasts & Strategies, High-Income Alert

The volatility in the stock market—and its global nature—has many investors concerned that this is the beginning of something more ominous, perhaps even a full-fledged secular bear market, observes Mark Skousen, editor of Forecasts & Strategies

While only time will tell for certain, I think that is unlikely. In fact, there are still grounds for cautious optimism.

Let’s start with the nature of equity markets. The relative calm in the six years following the financial crisis lulled some investors into thinking they can earn equity-like returns without the sleepless nights that stocks sometimes bring.

This is rarely the case. Reality has come back to bite many of these investors. As they say on Wall Street, “The stock market takes the stairs up and the elevator down.” In other words, stocks generally move down a lot faster than they move up.

However, history also shows that corrections and bear markets are much shorter than bull markets. By the time investors recognize a severe downturn has taken place, it is usually closer to the end than the beginning.

We continue to recommend solid companies with high and rising dividends. Our financial stocks look like great bargains to me.

BB&T (BBT), with a 3% yield, is the largest bank in the South, announced it would pay $1.8 billion for another regional bank, National Penn, and its 124 branches in Pennsylvania, New Jersey, and Maryland.

Raymond James now rates BB&T an outperform, following its acquiring National Penn.

It “will enhance BB&T’s regional presence” in the mid-Atlantic and “numerous cross-selling opportunities with the acquisition of Susquehanna bank branches” a few months ago.

An unbelievable opportunity is building with Main Street Capital (MAIN), the Houston-based business development company.

MAIN is currently yielding 8.1%, starting with its dividend payout of 18 cents a month (guaranteed until the end of the year), and that doesn’t include the two semi-annual payouts.

When you include them, the expected annual dividend yield is now over 10%. It is a great time to buy Main Street, especially if you like monthly income.

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