Stocks to Buy Now: How to Make Money from Banks

In the past, you used to be able to safely invest at the bank. But now, it might be wiser to invest in the bank, as the following institutions are looking more like attractive stocks to buy now.

Thanks to the U.S. Federal Reserve, interest rates will continue to be low for an extended period of time, meaning savers would be lucky to get 1%.

Meanwhile, bank stocks have gone from unloved and out of favor to being an industry on the verge of recovery - and able to pay dividends to shareholders.  

Income investors have a new opportunity with certain bank stocks. Banks that eliminated or reduced dividend payouts to preserve capital during the crisis are now loosening the purse strings a bit.

For example, many regional banks are starting to reinstate and raise dividends. As residential and commercial real estate markets continue to stabilize, banks should start to grow once again and higher earnings will lead to very high rates of dividend growth.

These bank stocks should be part of every income investor's portfolio right now as the long-term prospects for capital gains in addition to income are excellent.

Here are a few that rank among the regional bank stocks to buy as they raise payouts.

Stocks to Buy Now: Three Banks That Will Actually Pay You

People's United Financial Inc. (Nasdaq: PBCT) is an example of a bank stock that can provide much needed income to investors.

The bank has more than 400 branches in the Northeastern part of the United States and more than $30 billion in assets. The bank is in solid financial shape with nonperforming loans at just 2% of all loans, well below the average U.S. bank right now.

People's United Financial has plenty of excess capital and the shares trade for less than book value. At today's price the stock yields 4.77%, far in excess of what you earn by actually depositing your cash in one of its branches.

The bank is committed to increasing shareholder value by repurchasing stocks in the open market. In the fourth quarter alone, People's United repurchased $4.7 million shares of stock at a total cost of $56 million.

In addition, shareholders can expect to see dividends grow at least as fast as the U.S. economy, allowing the bank's payout to keep pace with inflation.

American National BankShares Inc. (Nasdaq: AMNB) of Danville, VA is another example of a smaller regional bank that offers excellent dividend yield and growth potential.

The bank has 25 branches in its home state and neighboring North Carolina, with $1.2 billion in assets. The loan portfolio is one of the healthier you will see in the post-crisis environment, with troubled loans at just .66% of total loans. The bank also has one of the highest net interest margins right now with the spread at 4.27%.

The stock trades right around book value and at just 10% earnings so the shares are reasonably priced. The dividend yield is 4.27% and American National has plenty of capital so it should be able to grow the payout at a respectable rate going forward.

Citizens & Northern Corp. (Nasdaq: CZNC) is a smaller bank located in Wellsboro, PA that offers a superior dividend yield for its shareholders.

The bank has 26 branches and $1.2 billion in assets in its North Central Pennsylvania region. Many of the bank's branches are located in the Marcellus Shale region, which should provide the possibility of strong growth in the years ahead as demand for oil and gas increases and the United States works towards energy independence.

Right now the stock yields 5.1% and is reasonably priced at just 10 times earnings.

There's another reason some regional bank stocks are good "Buys" now. It's because this year will see a huge wave of consolidation in the industry. Here are a couple names investors should consider when hunting for stocks to buy.