The market’s recent volatility has many investors on edge. So far this year, the major indices have lost between 8% and 10% … and January isn’t even over yet!
But while it’s smart to be on the defensive during such a shaky time for the markets, it’s equally smart to keep an eye out for resilient stocks. The ability to withstand this whiplash is a great indicator of a solid investment.
Financials have generally been more resilient over the past year, with the sector remaining flat. All but two others (real estate and consumer discretionary) declined, suffering losses as wide as 31%, while the S&P 500 shed 8% over the last 12 months.
One stock in the sector, Premier Financial Bancorp, Inc. (PFBI), is in the red year-to-date like most of the market. But this dividend stock comes with a silver lining: Its losses are slimmer than those of the S&P 500, with shares off only 2.2%, and that recent damage leaves the stock at a reasonable price while sweetening its yield.
More About PFBI Stock
For background, Premier is a multi-bank holding company. Its banks include branches in Kentucky; Ohio; West Virginia; Washington, D.C.; Maryland; and Virginia under names like Citizens Deposit Bank and Trust and its namesake Premier Bank Inc. The focus is on individuals and small-to-medium-sized businesses.
Focusing on smaller banks that focus on smaller lending is great, as big banks come with complexities that can be difficult to understand and which can add risk. They’re often vulnerable to country-wide collapses (think Greece) or offer fancy, confusing products.
Small banks tend to follow a much simpler formula, creating a stronger foundation — one that’s only amplified when they also reward investors with quarterly payouts.
That’s especially true as the market fluctuates. For instance, utilities are outperforming as investors flee to safety. Other solid dividend stocks like PFBI — which, by the way, boasts a beta of just 0.39, meaning it’s about 60% less volatile than the broader market — offer a similar appeal.
For starters, consider Premier’s fundamentals, which include profit margins north of 23% and operating margin north of 40%. Beyond that, the company’s 15-cent-per-share quarterly payout yields just under 4% but represents just 40% of its $1.50 in annual earnings.
Put another way, the payout is reliable on Premier’s income alone, but the company also boasts about $37.65 per share in cash as a fat, fat cushion.
PFBI’s payout history also confirms how rock-solid this dividend is. The company first shelled one out in 1996 and has been consistently doing so since 2012, while upping the payout 18% since 2013.
Add it up, and it’s unsurprising that PFBI stock has been weathering the market’s storm better than so many. At the same time, expect more investors to flock to the small banking stock as they seek shelter.
The upside to downside for dividend stocks is that yields get even more appealing at face value. The good news is that Premier Financial has the track record and fundamentals to actually back that payout up.
Hilary Kramer is the editor of GameChangers, Breakout Stocks Under $10, High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.