Dividend Expert Banks on J.P. Morgan

11/23/2017 5:00 am EST

Focus: FINANCIALS

Charles Carlson

Editor, DRIP Investor

I’ve been a fan of the banking sector for the last 12 months. Unfortunately, the group, after a big move in November, had been a laggard for much of 2017, explains Chuck Carlson, editor of DRIP Investor.

That is changing, however, as banks have perked up nicely in recent months. Factors boosting banks include the prospects for corporate tax reform and higher rates.

So far, recommended banks have turned in decent third-quarter numbers. J.P. Morgan (JPM) posted results that beat the consensus earnings estimate — the eighth consecutive earnings beat for the company. The stock popped on the news to a new 52-week high.

J.P. Morgan remains the quality play in the banking sector, and I expect these shares to outperform the broad market. The company just boosted its dividend 12% to a quarterly rate of $0.56 per share. The stock currently yields 2.3%.

Whether the Fed raises rates in December — which I think it will — or next year, short-term rates are likely to rise.  Whether rates at the long and of the curve will rise is not so certain, but I still expect J.P. Morgan’s net interest margins to expand further in 2018.

While these shares are always vulnerable to weakness should the Fed decide to postpone its rate hike, it has been prudent to buy the stock’s dips, and investors should continue to do so.

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