Warren Buffett loves bank stocks.
At the end of the second quarter, Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B) owned six different bank stocks with more than $71 billion invested in those financial institutions.
That’s 36% of the holding company’s entire equity portfolio.
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Why does he like bank stocks?
A big reason is the dividends they throw off each year, which is ironic given Buffett doesn’t pay dividends to his shareholders, and probably never will.
Estimates put the amount of dividends Berkshire Hathaway will receive from his bank holdings, including the company’s investment in American Express (NYSE:AXP), at approximately $1.7 billion … a massive sum by any standard.
The three banks stocks Berkshire Hathaway benefits most: Wells Fargo (NYSE:WFC) at $800 million, Bank of America (NYSE:BAC) at $400 million and AXP at $230 million.
Interestingly, that’s about the same as the interest Berkshire Hathaway’s insurance division pays, its biggest by revenue and profits, in annual interest on its debt.
As long as these bank stocks keep paying dividends, Buffett’s golden goose won’t have a problem continuing to lay its golden eggs.
If bank stocks are good investments for the Oracle of Omaha, it reasons they should be okay for the regular investor, too.
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Here are seven bank stocks to own for the long haul — one from seven different states.
Silicon Valley Bank (SIVB)
Based in Santa Clara, California, right in the heart of Silicon Valley, Silicon Valley Bank is part of SVB Financial (NASDAQ:SIVB), a financial holding company like very few others.
Back in 2013, I called SIVB one of the five-best stocks to buy for the next 20 years. Five years in, I’m glad I did because it continues to deliver for shareholders, up to 30% on an annualized basis over those five years.
“There is no regional bank better positioned to take advantage of the entrepreneurial spirit appearing to take root in countries like China, India and Israel,” I wrote at the time. “I know it’s hard to pick stocks that are going to do well in three years, let alone 20, but I see SIVB becoming a large-cap by 2020.”
Currently, its market cap is $16.9 billion, so depending on your definition, it’s either a large mid-cap or a small, large cap.
Either way, it’s my pick for the best bank stock to own in California.
Regions Bank (RF)
Named one one of the 30 Best Banks of 2018 by GOBankingRates, Birmingham-based Regions Financial (NYSE:RF) is a Fortune 500 company. RF has $95 billion in total deposits, making it the 16th-largest in America, and it has an $80 billion loan portfolio split nicely between consumer loans (39%) and business loans (61%).
Although Regions is based in Alabama, it has branches in 14 other states, with Florida sporting the most at 314, followed by 209 in Tennessee — five more than in its home state.
The bank is No. 1 or No. 2 by deposits in three states: Alabama (1), Tennessee (2) and Arkansas (2). In Florida, probably one of the most competitive states in the nation when it comes to banking, it’s ranked No. 7.
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Most importantly, its common equity tier 1 ratio is 11.0 — the fourth highest amount of a group of 14 peers that includes U.S. Bancorp (NYSE:USB), one of Warren Buffett’s six bank stocks.