Keefe, Bruyette & Woods Analyst Brady Gailey says he is getting more positive on Cullen/Frost Bankers, Inc. (CFR) despite the company’s exposure to energy. He currently has a “market perform” rating on the stock, but says he likes the outlook for Frost over the next several years.
“Their stock has traded down with oil, and they are one of the most conservative energy lenders in the state of Texas,” Gailey says. “They have been in the business over a century. They were one of the only banks that survived the 1980s.”
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Gailey says another positive for Frost/Cullen is its strong dividend yield. He says the current dividend yield is 3%, which is attractive to investors in the current environment.
“We have a lot of investors focusing more on the dividend yield nowadays just with a 10-year bond yield being below 2%,” Gailey says. “If you can have a 3% dividend yield, that’s something that investors are focusing on a lot today, and Frost is solidly asset-sensitive, so I think over time we will see higher rate. It’s just kind of a matter of when, and Frost is one of those names that will do really well.”
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