Fed Stress Test: Bank Stocks Trim Gains on Dividend Restrictions

A Gann report published by The IBC shows that two of the three top-performing bank stocks in yesterday’s Fed Stress Test Report belong to banks that did not have any limitations imposed on them. That’s not so good news for those who want to use bank stocks as a way to make big gains. How can you profit from the Fed Stress Test Report?

You can profit by buying stock in banks that are allowed to report dividends. In a world where many banks are in danger of failing, many have not been limited. Many of those banks will report a dividend.

The stock price will drop as they announce a dividend. If you buy shares at a discount and you don’t have to wait for the dividend to be announced, then you can buy shares at a premium and sell them for a profit when the dividend is announced. That means you can do something that no one else is doing and that is to buy and sell multiple stocks at the same time.

Banks are not the only ones that can report dividends. Companies can report dividends too. While there is no regulation mandating that companies must announce a dividend, many companies do it to benefit themselves.

Some companies can be controlled by their shareholders, while others will allow the market to dictate the stock price. That means you should be looking for companies that are publicly traded and have a track record of dividends paid.

Many companies with low dividend distributions ratio tend to have high quarterly earnings per share and will show better trends. Those are the types of companies you want to buy.

If you can’t find companies that have those characteristics, then it may be time to look at other banks to buy the stock prices. But that isn’t very easy because many banks may be limited in the amount of shares that they can issue.

Limitations can be imposed on dividends based on restrictions imposed on the banks. Some of those restrictions could be on the amount of capital that can be used for dividends, or they could be on dividends themselves.

Another thing to consider when you are looking for bank stocks to buy is the size of the bank. Some banks are able to issue dividends in larger quantities than others.

Sometimes those banks that are limited in terms of issuing dividends will buy stock at a premium and sell shares at a discount. The only way to get a good bargain is to buy shares when the bank is offering them for sale.

Just because you can buy bank stocks at a discount doesn’t mean that you can make big gains. It’s the same way as investing in mutual funds.

It’s easy to buy shares at a discount and the best way to make money when you buy those shares is to buy the stock price at a premium and sell when the price drops. The purpose of the exercise is to buy cheap and sell dear.

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