Bank Stock Finishing 2020 With a Flourish

SCHW is up 43% this quarter

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Banking giant Charles Schwab Corporation (NYSE:SCHW) recently announced plans to move its headquarters from the tech epicenter of Silicon Valley in San Francisco, California to Westlake, Texas. Moving away from California is a fad that's becoming more and more prominent as the work-from-home environment forces companies to seek a base with lower taxes and less costly labor. And for Schwab, its just another in a flurry of moves lately; in October 2020, they announced a $22 billion acquisition of its former competitor, TD Ameritrade (AMTD).

Charles Schwab stock is currently up 9% in 2020, but has tacked on 43.4% this quarter alone thanks to a post-earnings pop of 5.1% back on Oct. 10, and the aforementioned AMTD news. During this torrid run, the shares' ascending 20-day moving average has kept pullbacks in check.

It's an attractive time to buy premium on SCHW, too, per the stock's Schaeffer's Volatility Index (SVI) of 34% -- in the 9th annual percentile, meaning short-term options are pricing in lower-than-usual volatility expectations.

SCHW Stock Chart

Charles Schwab (SCHW) stock has a forward dividend of $0.72 along with a forward dividend yield of 1.39%. The company last paid a dividend of $0.18. SCHW has paid dividends to investors since 1990. Charles Schwab has a great balance sheet with $57.56 billion in cash and only $9.27 billion in total debt. In addition, the company grew its annual revenue and net income at an impressive rate between 2016 and 2019. Charles Schwab added over $3 billion in revenue and nearly $2 billion in net income during that timeframe. 

Charles Schwab has seen a top and bottom line decrease in 2020, but has still maintained solid figures. The company’s acquisition of TD Ameritrade should boost  revenue and net income at an even faster pace than before, making Schwab stock's price-to-earnings ratio of 24.08 more appealing than it would appear at first glance. Although the merger will take some time (up to 36 months, according to Charles Schwab press releases) to produce significant results, SCHW has the potential to be a sound long-term investment.

 

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