SunTrust Banks, Inc. (NYSE:STI) — This large regional bank serves 11 states and the District of Columbia with a concentration in Florida, Georgia, Virginia and Tennessee.
Due to the incredibly low interest environment over the past few years, SunTrust’s net interest margins have fallen in each of the past three years. But with interest rates expected to rise, this bank could be at the forefront of a recovery.
S&P Capital IQ anticipates Q1 2015 will mark the trough for interest income with growth expected as the Federal Reserve raises interest rates and on the prospects for better economic growth. A rise in short-term rates should directly strengthen SunTrust’s balance sheet.
Capital IQ forecasts earnings of $3.24 per share in 2015, up from $3.23 in 2014, and a jump to $3.40 in 2016.
After an extended consolidation, STI stock broke out in November following a buy signal from my proprietary indicator, the Collins-Bollinger Reversal (CBR), in October, and a golden cross in December.
Since January, STI stock consolidated its breakout, generally tracking its 50-day moving average. That is until Friday, when it broke from a triple-top and a six-month triangle pattern. The breakout was preceded by a CBR buy signal and followed by another, this time a major CBR buy.
The target for the breakout is $47, which would result in a return of 7%, but STI stock is also appropriate for long-term investors. The company pays an annual dividend of $0.96 per share for a forward yield of 2.2% and has paid a dividend every year since 1985.