Bank dividends could be at risk.
Bank stocks fell on Friday after the Federal Reserve highlighted potential vulnerabilities in the sector. The central bank suspended buybacks and limited dividends from financial institutions until the third quarter after its recent stress tests. Banks are expected to announce any changes in their dividends after Monday’s bell.
Nancy Tengler, chief investment officer at Laffer Tengler Investments, said Goldman Sachs could be one of the top financial companies best equipped to resist the coronavirus pandemic and economic slowdown.
“This is a company that makes 96% of its income from interest-free income, so it is a benefit in a flat to low interest rate environment,” Tengler said on CNBC’s “Trading Nation” on Friday. “In the long run, we like this story better than telling a Wells Fargo that gets 20% of the income from interest-free income, and is exposed to many of the spaces, cars and mortgages, cars in particular, that we don’t want be part of.”
Goldman Sachs is down 18% this year, while Wells Fargo is down 53%.
“From the valuation point of view [Goldman is] outstanding in our work, and a 2.5% dividend yield, increase it or not, “said Tengler.
Craig Johnson, chief market technician at Piper Sandler, also sees some opportunity in the bank crash.
“I want to lean on this type of sales and buy some of these banks. Now, technically, if you unpack the Citigroup chart, all you’ve done so far is retreat to the bullish support line of those February lows and From our perspective, this is a stock that we believe in this pullback that we should buy. It has also been relatively better performance compared to the XLF in recent times, “Johnson said during the same segment.
Citigroup is up 18% this quarter. In comparison, the XLF financial ETF has added 8% over the same period.
Disclosure: Laffer Tengler Investments owns Goldman Sachs.
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