Is This Beaten-Down Bank Stock Posed to Make You a Fortune in Dividends?
A lot of investors shy away from financials. Companies that make money lending to others, whether consumers or businesses, are inherently risky, as you can never be certain how the loans will perform. Those who suffered from bank failures during the past spring know these risks all too well. With underwater loans and fleeing depositors, several sizable banks saw their shareholders get wiped out in short order.
The short-lived banking panic has led to an investor exodus from the sector in 2023. Many bank stocks are now down 30% or more while the broader market has soared this year. But clearly, not all banks are headed to zero, creating some fantastic buying opportunities for contrarian investors. Ally Financial (NYSE: ALLY) looks to be one of these bank stocks. Here's why the automotive lender can make you a fortune in dividends if you buy now and hold for the long haul.
At its core, Ally Financial has a simple business model: It takes in money from depositors, pays interest to keep them around, and lends these deposits out to people who want to buy cars. It earns a spread -- known as net interest margin (NIM) -- on the interest it pays versus the interest it receives, which is how it makes a profit.
Source Fool.com
