Small-Cap Corner: Pining for Panama (BLX, WFC, XLF)
Banco Latinoamericano de Comercio Exterior (NYSE: BLX) is not a bank stock many U.S. investors are familiar with, but this small-cap Panamanian play has a lot to like, especially when measured against its U.S. rivals.
That is not surprising. The Panamanian investment thesis isn't easily accessible for Americans. Beyond Banco Latinoamericano de Comercio Exterior, also known as Bladex, the number of Panamanian stocks listed on major U.S. exchanges is tiny. In other words, Panama is not Brazil, Chile or Mexico when it comes to ease of access for investors looking for Latin America exposure.
That should not act as a deterrent regarding Bladex. With a market value of $734 million, the bank is firmly in small-cap territory and is sufficiently liquid in terms of average daily trading volume as almost 177,000 changes hands on a given day.
Obviously, investors are driven by performance and they are apt to wonder why they should roll the dice on a small-cap bank (from Panama of all places) over a more established name such as Citigroup (NYSE: C) or Wells-Fargo. (NYSE: WFC)
The proof is in the pudding. Beyond the fact that many large-cap U.S. banks still are not ready for the "trustworthy" label, Bladex outshines its U.S. counterparts where it really counts: performance. Year-to-date, Bladex is up almost 22%. Said differently, the returns offered by the Financial Select Sector SPDR (NYSE: XLF) and Wells-Fargo would have to be combined to exceed Bladex's performance. In the past month, Citigroup, Wells-Fargo and XLF are all down more than 5%, but Bladex has not dropped even 1%.
All of that added alpha comes with a 5.1% dividend yield and a growing payout to boot. Bladex was guilty of a dividend cut during the financial crisis, as the bank slashed its quarterly dividend to 15 cents a share in the second quarter of 2009 from 22 cents a share in the prior quarter. In defense of Bladex, the bank has raised its payout post-crisis more rapidly than many of its U.S. counterparts. Bladex has boosted its dividend three times since the fourth quarter of 2010 and now pays 25 cents a share per quarter after a 25% increase earlier this year.
First-quarter earnings nearly doubled and the company's return on equity jumped to 16.6%, its highest in five years during the quarter, according to Zacks. The company has surpassed analysts' expectations in three of the past four quarters.
Bladex offers earnings growth, dividend growth, yield and capital appreciation that are superior to a broad swath of major U.S. banks. Perhaps it is time to look to Panama.
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