Week 1: Banking on Fifth Third Bank

Building a foundation with FITB

You have to be kidding me. It’s been a week … already!? Man did I miss marching my way toward financial freedom – constructing a consistent passive income stream and building a portfolio designed to create long-term wealth. Needless to say, I’m glad to be back at it. Buying shares of Fifth Third Bank, General Motors and AT&T to get things rolling sure felt good.

With a week in the books since the relaunch, it’s time to document exactly what went down so far. I want to be super transparent this time around. To do that, I’m going to have to be as consistent with my blog posts as I am with my investing. As you can see by the featured pic, I’m sitting at $584.74. At this pace, it’ll only take me another 1,710 weeks (32 years) to hit $1,000,000. Hopefully the magic of compounding can shed some of that time, though.

If you so much as skimmed through my previous post, the only post on the site other this this one at this point, you know I started things off with a $500 deposit – a chunk of cash I used to buy five shares each of GM, FITB and T. Since then, I deposited $20 a day, which I will continue to do, and bought shares of Fifth Third Bank whenever I had enough cash in my Robinhood account to cover the cost.

The daily deposits turned into three more shares of the regional bank, which I plan on making a foundational stock as I continue to grow my portfolio.

Fifth Third Bank position
My FITB position … one that will only grow as time goes on.

What makes this regional bank a solid investment?

Fifth Third Bank (FITB) is, in my far-from-professional opinion, a unique investment opportunity. It’s a regional bank, make no doubt about it, but that could soon change. It recently filed an application with the OCC to convert from an Ohio state-chartered bank to a national bank. In other words, It’s a regional bank that’s getting too big for the region. If it expands the right way – responsibly, patiently, etc. – it could mean good things for investors. If it doesn’t handle things well, it could spell trouble for me as it’ll be a cornerstone of my portfolio.

Fifth Third Bank is also a great example of why you can’t react to every bit of news that slides across your newsfeed. If you like a company, buy it. If you don’t, don’t … and go buy one you do.

I like Fifth Third Bank. It rallied 2.2% after announcing a 9% dividend hike and plans to initiate a 100-million share buyback program. Good news, right? Of course. Dividend raises are awesome and a big buyback means the company thinks its stock is undervalued.

A day or so later, though, news came out that the regional bank will shut down 44 Chicago-area branches. The stock dipped a bit on that announcement … even though the news doesn’t really seem like that big of a deal to me. Most (more than half) of the banks being closed are within a mile of another branch, so it seems like a streamlining more than anything else. I like it. Sometimes, even for a bank that’s growing, less is more.

We’ll see how things go from here as the next year or so seems like it’ll be an important one for FITB. As for right now, though, it’s hard to argue with its fundamentals. The regional bank has a P/E ratio under 10 and dividend yield up around 3.5%. Debt is low, profit margin is high, EPS is on the rise and, even with the recent dividend raise, that dividend’s payout ratio is only 30%.

What do you guys think of Fifth Third Bank? Any of you own it?

That should just about do it for now.

March on!

March with me

Looking to get started? Start with Robinhood: http://share.robinhood.com/benjams352

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