Investing in financial stocks is not just about picking the largest and most-known banks. Financial stocks include banks, insurance companies, firms that provide various financial services, financial technology (fintech) firms, and blockchain technology companies.
The best financial stocks to buy were chosen from a myriad of choices with features that will justify their best-in-show classification. Some of these investment criteria are valuation, profitability and growth. The rising interest rates set a bullish thesis for banks, but at the same time set a challenging environment for asset management companies. Here are seven financial stocks to add to your portfolio as most of them provide a nice dividend yield, which is a smart and effective way to generate passive income.
Here are the seven best financial stocks to buy now:
|FSK||FS KKR Capital Corp.||$20.56|
|AMRK||A-Mark Precious Metals, Inc.||$27.27|
|OFS||OFS Capital Corporation||$10.10|
|PSEC||Prospect Capital Corporation||$7.34|
|MSBI||Midland States Bancorp, Inc.||$24.94|
|TRIN||Trinity Capital Inc.||$14.48|
Best Financial Stocks: FS KKR Capital (FSK)
FS KKR Capital (NYSE:FSK) is a business development company supporting private middle market U.S. companies by offering credit solutions. The investments are primarily in senior secured debt and in subordinated debt. The firm aims to achieve what every firm should do, the best possible risk-adjusted returns for its shareholders and investors.
The stock trades at a price-to-earnings (P/E) ratio of 3.06 and offers a forward dividend yield of 14.01%.
The one-year target estimate is $23.06, an upside potential of 19%. The stock is too cheap as it has a price/earnings-to-growth (or PEG) GAAP of 0.06 and a forward price-to-book (P/B) ratio of 0.71X.
Revenue growth last year was 740.27% to $1.25 billion and the net profit margin is amazing at 121.01%.
A-Mark Precious Metals (The stock trades at a P/E ratio)
A-Mark Precious Metals (NASDAQ:AMRK) is a fully-integrated precious metals platform that allows trading in metals like gold, silver, platinum, and palladium. The company offers forward sand spot trading, worldwide delivery and storage services, market making, and inventory financing in the form of leases and consignments.
The stock trades at a P/E ratio of 5.33 with a one-year estimate target of 51.17, which if materialized, would be a gain of 57%.
The sales growth is very good, jumping from 14.17% in 2020 to 39.40% in 2021. In the past three years, the firm has found an edge as its profitability has increased a lot, which is very bullish. In 2018, the company reported a net loss of $3.4 million. Since then, in 2019, 2020, and 2020, the company reported a net income of $2.23 million, $30.51 million, and $159.64 million respectively.
AMRK stock is very cheap now with a price-to-sales (P/S) ratio of 0.09X.
Best Financial Stocks: OFS Capital Corporation (the forward dividend yield of 11.69% is great)
OFS Capital Corporation (NASDAQ:OFS) provides capital solutions in the form of debt capital and minority equity investments to U.S middle-market companies across different industries. The investment objective of the firm is to generate both current income and capital appreciation for its shareholders.
The business is generating consistent profits as net income grew 1,439.36% in 2021 to $56.86 million. Although the sales growth is not impressive, as it is weak and negative over the past two consecutive years, the stock is very attractive now as it trades at a P/E ratio of 2.22 and the forward dividend yield of 11.69% is great.
The net income margin of 85.7% and the return on equity of 33.1% are very supportive of a stock price appreciation.
The one-year target estimate is $12.75 for an upside potential of 25%.
Prospect Capital Corporation (CIB)
Prospect Capital Corporation (NASDAQ:PSEC) is another business development company in this list of financial stocks to buy in Jul. 2022 that makes make debt and equity investments in the U.S. middle-market businesses in a range of industries. Investors will like the company’s aim to deliver steady and attractive returns to its shareholders.
The business is relatively stable with sales growth that does not impress. However, what is impressive is the profitability trend. In the past five years, the company generated one loss of $16.22 million in 2020. In 2021, the net income was $963.81 million, an impressive growth of 6,040.63%.
The shares of Prospect Capital Corporation are now trading at a P/E ratio of 3.33 and they offer a very generous forward dividend yield of 10.33%.
In the case of PSEC stock, the one-year target is $6.50. This price has already been reached as the stock had a closing price of $6.99 on Jun. 30. This is highly bullish as it signals further momentum could be underway.
Best Financial Stocks: Bancolombia (of 5.8)
Bancolombia (NYSE:CIB) is a leading financial group in Colombia with more than 25 million clients and more than 30,000 direct employees. The firm has more than 146 years of experience. In the financial services sector, this is precious since experience translates to customer satisfaction and consistent business.
The net income trend is volatile, but the growth of 1,380.76% in 2021 is more than enough to compensate for this volatility. The net interest income is stable and growing. The same trend applies to funds from operations, which increased 34.99% in 2021.
CIB stock is relatively very cheap, trading at a P/E ratio of 5.8 with a nice forward dividend of 3.22%.
The one-year estimate target of $33.44 signals a conservative upside potential of nearly 10%. The P/B ratio of 0.89X makes an investment in this financial group very appealing.
Midland States Bancorp (trades at a P/E ratio )
Midland States Bancorp (NASDAQ:MSBI) is a diversified financial services company that offers services like retail banking, treasury management, mortgages, equipment financing, and business and commercial services.
Starting with a valuation analysis, MBSI stock trades at a P/E ratio of 6.59 and has a forward dividend yield of 4.77%.
The revenue growth is expected to increase by 6.83%, 4.32%, and 5.59% in 2022, 2023, and 2024, respectively.
The stock has a P/B ratio of 0.83X, and a net income margin of 28.8%. The return on equity of 13.05% is considered very good for this business. Analysts have a one-year target of $29.75, signaling a potential rise of 22%.
Best Financial Stocks: Trinity Capital (Publishing Guidelines)
Trinity Capital (NASDAQ:TRIN) is a business development company that provides venture debt and equity financing to high-growth companies. It has funded 201 companies and has $966 million under management.
For a company that invests in risky and high-growth companies, the forward dividend yield of TRIN stock is impressive at 11.41%.
Could it be the case that investors have not yet discovered the potential of this firm as its stock trades at a P/E ratio of 4.33? I believe so, as the revenue grew from $45.56 million in 2020 to $94.9 million in 2021, an increase of 108.29%. Additionally, net income surged 2,200% in 2021 to $132.32 million. The profitability looks robust with a net income margin of 82% and a return on equity of 24.93%.
The PEG GAAP of 0.21 and forward P/B ratio of 0.95X make shares of Trinity Capital cheap. There is plenty of potential upside potential as the one-year target of $18.58 signals a likely gain of 28%.
On the date of publication, Stavros Georgiadis, CFA did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.