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Regions Financial has low earnings and dividend growth

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Earnings are growing, but at a slow pace

Regions Financial’s (RF) net income increased by 1% in 2014—compared to 2013. The tough interest rate environment impacted the net interest income growth. Net interest income contributes ~64% to the company’s total income. This is one of the biggest factors impacting earnings growth.

The bank needs to look at ways to improve its income from other sources. Regions Financial expressed that revenue diversification is one of its top priorities in the coming years.

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Revenue diversification initiatives include growth in checking, savings, credit card, and wealth management accounts. It also plans to improve mortgage income. The bank plans to build capital market capabilities, investment services, and real estate capital markets. It’s also looking to increase insurance fees through acquisitions.

Dividend growth

Even after so many years, Regions Financials is still recovering from the effects of the financial crisis. It was one of the banks that was hit hard by the crisis. It was hit hard mainly due to its focus on real estate lending and its concentrated geography of operations. Due to the crisis, it was forced to restrict its dividends to $0.01 per quarter.

The bank finally increased its dividends in 2013 to a yearly amount of $0.10 per share. It increased to a yearly $0.18 per share in 2014.

Dividend yield

The dividend yield is a company’s annual dividend per share expressed as a percentage of share prices. The above graph compares Regions Financial’s dividend yield with other banks. Fifth Third Bank (FITB) has the highest dividend yield among the banks. BB&T’s (BBT) yield is higher than Regions Financial. Regions Financial’s dividend yield is comparable to SunTrust Banks (STI). Together, these four banks form ~5.4% of the SPDR S&P Regional Banking ETF (KRE).

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