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Friday, 07/16/2004

Betting the Bank
By Nich Sheldon
PBCT - People's Bank

Company Description

People's Bank is a diversified financial services company providing consumer and commercial banking services, in addition to insurance and financial advisory services. The bank is a leader in supermarket banking, with 65 of its 155 branches located in Super Stop & Shop stores. Through its subsidiaries, People's provides brokerage and financial advisory services, asset management, equipment leasing and financing, and insurance services.

[Source: Company Press Release]

Reasons to Invest:

This week's Drip of the Week is People's Bank (NASDAQ:PBCT). I am encouraged by a number of factors surrounding PBCT. Of course I like their annual dividend of 1.16/share, which is a 3.66 percent annual yield. I also like the technical perspective provided by their chart. Not to undermine the 18% - or 73.4 million - increase in their first quarter net interest.

On Friday, July 16, 2004 - People's Bank received a new star analyst ranking, giving them a total of 3 out of 9 top analysts covering them. These analysts are ranked by StarMine.com, which boasts having the Best Analyst Researchers on the net - based upon their own screening methods for each analyst.

On Thursday, July 15, 2004 the company sent out a press release stating that their second quarter net income was $25.0 million - or $0.27/share - which calculates out to a 61 percent increase over last years Q2 earnings of $0.17 per share. In the same report the Board of Directors had declared a $0.29/share owned quarterly dividend. The payable date for the dividend is set for August 15th, 2004 to shareholders on record as of August 1st. This gives us two weeks to enter the investment and still be eligible to collect on the dividend. The article went on to state that People's Mutual Holdings (who owns 54.7 million shares of PBCT) would accept the quarterly dividend on only 3 percent of their shares, based on the closing price on July 14th. This means the PBCT will be saving a pretty penny on this quarterly dividend, which should help to keep Q3 earnings in-line with estimates.

The company also reported that their commercial banking loans grew by 10 percent, or $284 million. Their average commercial non-interest-bearing deposits increased by 6 percent, or $51 million. The Consumer Financial Services noted that average home equity loans increased by a whopping 35 percent, or $223 million. Their average residential mortgage loans increase by 2 percent, or $49 million. While these are all positive figures the company isn't perfect by any means, but their technical trend helps me to see past their downfalls (more on this in a second).

On April 28th, Automated Financial Systems, Inc (AFS-Exton), was awarded rights by PBCT to process the Bank's growing commercial real estate loan portfolio. While this is an extremely nice contract for AFS to land, PBCT will benefit from the deal just as much as AFS will. The implementation will not only improve the efficiency and reduce costs by consolidating portfolios on a single system, but it will also reduce the operational and technical support requirements for People's Bank. This means that PBCT will again be saving dollars by having the loan process being automated, and cutting back on technical support hours, which could ultimately help the company meet or beat Q3 earnings.

In regards to dividend growth, People's Bank is forecasting a 7.74 percent increase in dividend over the next year, 8.44 percent over the next three years, and 12.74 percent over the next five years.

I currently see a low limit for new investment into People's Bank, which coincides nicely with the fact that the stock has been trending smoothly through an April 03 regression channel on the daily chart. Not to mention the fact that the stock has been setting new all time highs over the past few months. I find it noteworthy to mention that the stock is currently finding support at the 22-DMA (30.98), yet on Friday the stock closed just below this level. This could be the first sign that the recently overextended stock is ready for some profit taking. Should a few profit taking sessions occur next week; this could provide a nice entry for us DRIP investors who are wishing to make our initial stock purchase a little less expensive.

The weekly chart on PBCT looks very impressive as the chart continues to ride the simple 10-DMA higher in the channel. Additionally, the Stochastics indicator has the chart on a strong buy signal in Neutral territory, meaning that the stock is not oversold, nor overbought. I also note the 10-DMA over the 20-DMA on the weekly and monthly chart, which is a strong buy signal. Now lets hope that these indicators don't lead us astray.

Traders should note that the BIX S&P Banks Index has continued to stay above its simple moving averages, and is one of the few indexes that has yet to begin a downward regression channel. Remember it is vital that you know how certain indexes are doing before you begin any investment. For instance, you would be taking a riskier bet to play a stock that looked decent, but belonged to a sector that was falling apart, than a stock that looked average, but belonged to a strong performing sector.

This ends another exciting episode of the DripAdvisor.com Drip of the Week. Stay tuned next week, as we will spotlight another stock worthy of the DripAdvisor.com limelight.

Until Next Week,
Nich Sheldon
Editor
www.dripadvisor.com
questions@DripAdvisor.com

Broker Recommendations

Strong Buy         1
Buy                2
Hold               1
Sell               2
Strong Sell        0

Brokers Covering   6


DRIP Information:
Shares to Qualify = 1
Auto-reinvestment = No
Accept Foreign Accounts: Yes
Temper Enrollment: Yes

Min/Max Investment = $100-$10,000/month


Reinvestment Fees - 
Dividend investment fees: $0.00
Cash investment fees: $0.00
Auto reinvestment fees: N/A


Transfer Agent:
ChaseMellon
800-953-2592


Corporate Headquarters:
850 Main Street
Bridgeport, CT 06604
Phone: (203) 338-7171
Fax: (203) 338-2545



 
 

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