Bank Failures Lowest in 9 Years: 4 Dividend Leaders to Buy Now

Banking, finance, and taxes

Published: March 31, 2016 8:20 am

Last Updated: January 13, 2020 11:19 am

For a variety of reasons, the financials, and in particular some of the top banks, have struggled this year. In fact, through the end of last week the sector was down a stunning 5.78%. Continued low interest rates and a genuine concern that an avalanche of energy-related loan failures are in the offing have weighed heavily on the sector, and to some of the bearish voices on Wall Street, things are just about ready to get worse.

The fact of the matter is that in research provided by the Federal Deposit Insurance Corporation (FDIC), only eight banks failed in 2015, and that was the fewest in nine years. Clearly there must be some value in the top companies. We screened the financials research universe at Merrill Lynch for stocks that pay a dividend and are rated Buy. We found four top companies for investors to consider now.

Goldman Sachs

This company continues to be the gold standard of Wall Street banks and trades at a low 9.4 times estimated 2016 earnings. Goldman Sachs Group Inc. (NYSE: GS) has a gigantic institutional equity, debt and derivatives business, an ultra high net worth clientele, top investment banking and capital markets expertise. The bank continues to be a dominant force around the world and is one of the most sought after in the world. And it is one of the very few that dictate who can be a client at the firm.

In investment banking, the company has the preeminent client franchise. Goldman Sachs advised on more than $1.5 trillion of announced mergers and acquisitions transactions last year, the highest level the bank has ever recorded. It also has maintained a leading market share over the past 25 years. It maintained a market position when merger and acquisition activity was dominated by technology in 1999, by financials in 2008 and by natural resources in 2014. The bottom line is, regardless of where market strength is in any given year, Goldman Sachs is up to the task.

Goldman Sachs shareholders are paid a 1.66% dividend. The Merrill Lynch Price target for the stock is $185, and the Thomson/First Call consensus price target is $189.42. The stock closed Wednesday at $156.50 per share.