We recently published a list of the 11 Best Regional Bank Dividend Stocks to Buy. In this article, we are going to take a look at where First Horizon Corporation (NYSE:FHN) stands against other best regional bank dividend stocks.
The year 2024 proved to be a strong one for major US banks, with the six largest institutions collectively reporting a 20% increase in net profits compared to the previous year, according to FactSet data. This performance ranks among the most successful years for the US banking sector in the past two decades. The industry rebounded significantly following the widely publicized bank failures of 2023, which saw several prominent lenders collapse. Based on Financial Times estimates, trading revenue for the year climbed to $123 billion, reflecting a 10% rise from 2023, while investment banking fees jumped 34% to $36 billion. This surge was driven by a recovery in dealmaking activity later in the year, as more companies moved forward with equity and debt offerings.
Regional banks have been gaining momentum within the banking sector following the regional banking turmoil of spring 2023, which prompted lenders to prioritize liquidity, often at any cost. While their performance was strong relative to the Russell small cap index, it still fell short of the broader market’s full-year return of over 25.02%. Despite the gains in 2024, bank stocks have lagged the broader market over multiple years, creating an attractive investment opportunity at historically low valuations. By the end of the year, the price-to-earnings (P/E) multiples of the Regional Banking Index and Community Bank Index were nearly half that of the broader market’s, highlighting their relative discount.
Moreover, in the fourth quarter of 2024, approximately two-thirds of US regional banks reported higher earnings compared to the previous year. According to S&P Global Market Intelligence, 35 out of 51 banks with assets between $10 billion and $100 billion saw year-over-year growth in earnings per share (EPS) for the fourth quarter, based on financial reports released between January 13 and January 24. In addition, 27 regional banks posted quarter-over-quarter improvements, while 22 recorded EPS gains on both a quarterly and annual basis. Meanwhile, only 11 regional banks experienced EPS declines in both comparisons.
A report from S&P Global Ratings noted that fourth-quarter net income improved due to easing pressures on net interest margins (NIM) and an increase in fee income. For the full year 2024, the net income benefited from reduced provisions and stable fee income, though NIM compression partially offset these gains. Regional banks saw another consecutive increase in net interest income (NII) during the quarter, supported by modest loan growth and an improved NIM. However, for the full year, NII remained under pressure.
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The report further mentioned that in the fourth quarter, median NIM rose by 5 basis points to 3.14%, as declining deposit costs outweighed the impact of lower loan yields and asset repricing. The firm anticipates a slight increase in earnings for 2025, driven by the possibility of higher NIMs and a gradual uptick in loan growth.
The banking sector remains a favorite among investors as it ranks among the top two sectors for dividend payments. An S&P Global report estimated that banks worldwide distribute approximately $380 billion in dividends. Given this, we will take a look at some of the best dividend stocks from the regional banking sector.
Is First Horizon Corporation (FHN) the Best Regional Bank Dividend Stock to Buy?
An experienced banker offering financial advice to a young couple.
For this article, we used a Yahoo Finance screener to identify regional banking companies. From the resultant list, we picked 11 stocks with the highest number of hedge fund investors, as per Insider Monkey’s database of Q4 2024. The stocks are ranked in ascending order of hedge funds’ sentiment towards them.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Number of Hedge Fund Holders: 52
First Horizon Corporation (NYSE:FHN) is the parent company of First Horizon Bank that operates through three key divisions: Regional Banking, Specialty Banking, and Corporate. The company offers a comprehensive suite of financial services, catering to both businesses and individuals with products such as loans, deposits, and wealth management solutions. In the past 12 months, the stock has surged by over 12%.
First Horizon Corporation (NYSE:FHN) reported strong earnings in the fourth quarter of 2024, with a revenue of $824 million, which saw a 3% growth from the same period last year. Strong client relationships and a well-balanced business model enabled the company to generate earnings despite a challenging interest rate environment. Business growth remained steady in 2024, supported by a strong net interest margin, higher counter-cyclical revenues, and a decline in net charge-offs. The company achieved solid performance during the quarter, with a two-basis-point expansion in net interest margin, a 6% rise in fixed income revenue, and net charge-offs of 8 basis points, positioning it for a strong start to 2025.
First Horizon Corporation (NYSE:FHN) offers a quarterly dividend of $0.15 per share and has a dividend yield of 3.49%, as of April 3. During the quarter, the company returned $930 million to shareholders through dividends and share buybacks.
Overall, FHN ranks 3rd on our list of the best dividend stocks from the regional banking sector. While we acknowledge the potential of FHN as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued dividend stock that is more promising than FHN but that trades at 10 times its earnings and grows its earnings at double digit rates annually, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.
