Stock Watch
SouthTrust: Premium Profitability
A hope inspiring 12-year streak of rising earnings and dividends is likely to continue for this regional banker.
April 14, 2003
With all the market blahs lately, investors hoping to chance upon a stock that delivers growth, stability and a lavish payout might feel like they're waiting for Godot.
Enter SouthTrust (SOTR), a largish, Southeast regional bank that's increased profits and its annual dividend 12 years running. Analysts at Standard & Poor's Outlook newsletter expect the hopeful trend to continue and that the stock will outperform the market in the year ahead.
SouthTrust's deposits and mortgage lending are growing strong, and sound underwriting has kept loan charge-offs below average. SouthTrust also has been able to buy up smaller banks and integrate them inexpensively, which should boost long-term earnings growth.
The stock trades at two times its book value (just a whisker over the industry average) and at less than 12 times the 2004 consensus earnings estimate of $2.23 per share. Outlook says that SouthTrust shares deserve a premium, however, because of the company's superior record of profitability. SouthTrust also pays an 84 cents-per-share dividend, which has grown represents 320% over the past ten years.
-- Elizabeth Frengel
