In this article, we will take a look at some of the best dividend stocks from the banking sector.
The year 2024 was significant for major US banks. A recent Financial Times report highlighted that the country’s seven largest banks accounted for 56% of the industry’s profits in the first nine months of the year, up from 48% in the same period of 2023. The banking sector has also strengthened its capital position. In November, the Federal Reserve Board reported that 99% of US banks maintained capital levels above regulatory requirements. In addition, the Federal Deposit Insurance Corporation (FDIC) observed a 3.5% rise in equity capital during the third quarter of 2024, reinforcing the sector’s improving capitalization.
Bank stocks surged after President-elect Donald Trump’s victory in the 2024 presidential election. The rally was swift and broad-based, driven by market expectations of a more lenient regulatory environment starting in 2025, particularly regarding mergers and acquisitions. In November, the median total return for the 211 banks analyzed by S&P Global Market Intelligence reached 13.4%, significantly outperforming the broader market’s 5.9% return.
Also read: 14 Best Large Cap Dividend Growth Stocks To Buy Now
Another factor influencing the bank’s performance was the Federal Reserve’s release of parameters for its annual industry stress test, which outlined milder hypothetical economic shocks compared to previous years. Although the test remains challenging—projecting US unemployment rising to 10% and home prices dropping by 33%—the 2025 scenario includes smaller increases in joblessness and less severe declines in stock and real estate values than in recent years. Barclays analyst Jason Goldberg highlighted these adjustments in a report titled “2025 Stress Test: Scenarios Easier than Past Two Years.” Bank of America analyst Ebrahim Poonawala noted that with the latest version of the test being less stringent and more predictable, banks may not need to maintain as large of a capital buffer later this year. Here are some other comments from the analyst:
“The 2025 stress test scenario, broadly better vs last year, increases our confidence that banks should begin to see the relief on regulatory capital requirements, given our expectations for a shift to a balanced, transparent, and more predictable regulatory regime.”
In December, Moody’s upgraded its industry outlook from negative to stable for the first time since 2023, pointing to interest rate cuts and monetary policy adjustments by G-20 nations. The Federal Reserve implemented three rate cuts last year, bringing its target interest rate down to a range of 4.25% to 4.5%. Wall Street remains optimistic about the sector, with Barclays analyst Jason Goldberg predicting that major bank stocks will continue to rise, driven by expectations of a pro-growth, deregulation-focused agenda under the new administration. However, he acknowledged that corporate borrowing has remained subdued as businesses evaluate the post-election environment.
Investor interest in bank stocks is growing, largely due to their attractive dividend payouts. A report from Janus Henderson revealed that banks were responsible for one-fifth of all dividends distributed in the third quarter, reflecting a 6.6% increase on an underlying basis—outpacing the average across all sectors. Given their significant market presence, banks contributed the most to dividend growth in Q3, slightly surpassing the media sector. The latter saw a substantial 166% surge in payouts, driven by the resumption of dividend payments from major tech companies. The report further highlighted that bank stocks paid $38.2 billion in dividends during the third quarter of 2024. Given this, we will take a look at some of the best dividend stocks from the banking sector.
A series of ATMs in a row, symbolizing the company’s 24/7 banking services.
Our Methodology:
For this list, we picked the top 10 bank dividend stocks based on their popularity among elite hedge funds in the third quarter of 2024. We gauged hedge fund sentiment for these stocks using Insider Monkey’s database of 900 hedge funds, as of Q3 2023.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
10. Truist Financial Corporation (NYSE:TFC)
Number of Hedge Fund Holders: 45
Truist Financial Corporation (NYSE:TFC) is an American bank holding company that offers services in commercial banking, savings accounts, mortgages, credit cards, and more. The company has effectively utilized its digital platform, reporting a 7% year-over-year growth in mobile users. In addition, the company successfully opened 730,000 new digital loan and deposit accounts in 2024. Its investment banking division has been the top performer, seeing a 46% increase in trading revenue. During its most recent earnings call, the CFO projected a slight rise in net interest margin, along with modest growth in its loan and deposit portfolio. Truist is well-capitalized, maintaining a CET1 ratio of 11.5%, with plans to reach around 10% in the near term. The company is also focusing on boosting fee-based revenue to mitigate potential challenges from adverse interest rate movements.
In the fourth quarter of 2024, Truist Financial Corporation (NYSE:TFC) reported revenue of $5.11 billion, which showed a 5% growth from the same period last year. The company’s net income for the quarter came in at $1.28 billion. It saw a $6.5 billion, or 1.4%, increase in average earning assets, largely driven by a $7.7 billion, or 6.6%, rise in average securities. Average deposits grew by $5.7 billion, or 1.5%, while average short-term borrowings increased by $4.2 billion, or 20%. In contrast, average long-term debt decreased by $1.2 billion, or 3.4%.
Truist Financial Corporation (NYSE:TFC) is a solid dividend payer because of its commitment to returning value to shareholders. For the full year 2024, the company returned $3.8 billion in capital to common shareholders through dividends and share repurchases. This included the repurchase of $500 million in common shares, leading to a dividend payout ratio of 57% and a total payout ratio of 98%. The company currently offers a quarterly dividend of $0.52 per share and has a dividend yield of 4.5%, as of February 13. TFC is one of the best dividend stocks on our list as the company has been making regular dividend payments to shareholders since 1997.
9. The Bank of New York Mellon Corporation (NYSE:BK)
Number of Hedge Fund Holders: 45
The Bank of New York Mellon Corporation (NYSE:BK) is an American financial services company, headquartered in New York. The bank was established in 2007 through the merger of the Bank of New York and Mellon Financial Corporation and became the largest custodian bank globally. The company reported strong earnings in the fourth quarter of 2024, with revenues amounting to $4.8 billion, which showed an 11% growth from the same period last year. In FY24, it posted a net income of $4.3 billion, which surged by a whopping 43% from 2023.
The Bank of New York Mellon Corporation (NYSE:BK) introduced a new commercial coverage model, developed innovative products and solutions for clients, and completed a brand refresh. It also announced and finalized its first acquisition in several years and began the gradual transition to its strategic platforms operating model. In addition, the company continued to focus on enhancing its culture and attracted top talent to strengthen its team further. In the past 12 months, the stock has outperformed the market, surging by over 59%.
On January 15, The Bank of New York Mellon Corporation (NYSE:BK) declared a quarterly dividend of $0.47 per share, which was in line with its previous dividend. The stock has a dividend yield of 2.19%, as of February 13. In the most recent quarter, the company paid $349 million to shareholders through dividends, demonstrating its practice of returning value to investors. In addition, BK has raised its payouts for 14 consecutive years, which makes it one of the best bank dividend stocks.
8. Morgan Stanley (NYSE:MS)
Number of Hedge Fund Holders: 55
Morgan Stanley (NYSE:MS) ranks eighth on our list of the best dividend stocks from the banking sector. The global financial services company offers a wide range of related services and products to its consumers.
In the fourth quarter of 2024, Morgan Stanley (NYSE:MS) reported $16.2 billion in revenue, reflecting a 25% increase compared to the same period the previous year. The company’s net income rose to $3.7 billion, or $2.22 per diluted share, up from $1.5 billion, or $0.85 per share, in the prior year. Total client assets across Wealth and Investment Management grew to $7.9 trillion, bolstered by strong market performance and healthy new asset inflows. The company is focusing on four key pillars—strategy, culture, financial strength, and growth—to support its Integrated Firm model and generate long-term value for shareholders.
Morgan Stanley (NYSE:MS) has generated solid returns over the past year, soaring by over 62%. The company recently has been concentrating on expanding its wealth management division, enhancing its technological infrastructure, and maintaining financial stability to adapt to evolving regulations. Its success is driven by improving client services through technological advancements and managing asset growth while effectively navigating regulatory requirements and risks.
Morgan Stanley (NYSE:MS) has returned $150 million to shareholders through dividends in the most recent quarter. The company’s quarterly dividend comes in at $0.925 per share and has a dividend yield of 2.71%, as recorded on February 13.
7. American Express Company (NYSE:AXP)
Number of Hedge Fund Holders: 62
American Express Company (NYSE:AXP) is an American bank holding and financial services company that mainly specializes in payment cards. The stock is grabbing investors’ attention, delivering a nearly 46% return in the past 12 months. In October 2024, the company purchased UBS’s 50% share in Swisscard, gaining full ownership of the credit card provider. This move helped American Express solidify its presence in the Swiss market and incorporate Credit Suisse customers into its existing credit card services. The company’s strong competitive advantages have created a robust model for inflation protection, which has become increasingly apparent as the company continues to expand.
In the fourth quarter of 2024, American Express Company (NYSE:AXP) reported revenues exceeding $17 billion, reflecting a 9% year-over-year increase. Its net income for the quarter surpassed $2.1 billion, representing a 12% growth compared to the previous year. American Express achieved record-breaking figures in annual Card Member spending, net card fee revenues, and new card acquisitions, adding 13 million new cards throughout the year. The company also expanded its global reach, adding millions of new merchant locations. By the end of the year, growth gained momentum, with billings rising 8% in the fourth quarter, driven by increased consumer and commercial spending during the holiday season.
American Express Company (NYSE:AXP) is a solid dividend payer, having raised its payouts six times in the past three years. Moreover, in the past five years, the company has raised its dividends at an annual average rate of over 11%. Currently, it pays a quarterly dividend of $0.82 per share for a dividend yield of 0.91%, as of February 13.
6. The Goldman Sachs Group, Inc. (NYSE:GS)
Number of Hedge Fund Holders: 72
The Goldman Sachs Group, Inc. (NYSE:GS) is a leading investment bank and financial services company. It operates across three main divisions: Global Banking and Markets, Asset and Wealth Management, and Platform Solutions. Its revenue sources include advisory fees from mergers and acquisitions, underwriting services, proprietary trading, prime brokerage, and private equity investments. The firm also generates income through its direct banking unit, Goldman Sachs Bank USA, and various hedge funds. By structuring complex financial products, facilitating initial public offerings, and making strategic investments, the company maintains its competitive advantage. With a strong reputation, a broad client network, and deep financial expertise, it remains a leading player in the global financial industry.
In the fourth quarter of 2024, The Goldman Sachs Group, Inc. (NYSE:GS) reported revenue of $13.87 billion, reflecting a 23% increase compared to the same period the previous year. Over the full year, assets under supervision grew by 12%, reaching an all-time high of $3.14 trillion. The firm’s book value per common share also saw a 7.4% rise, reaching $336.77. Moreover, Goldman Sachs ended the year with a solid liquidity position, holding $182 billion in cash and cash equivalents, an increase from $155 billion in the prior quarter.
The Goldman Sachs Group, Inc. (NYSE:GS) is one of the best dividend stocks on our list as the company has been paying regular dividends to shareholders since 1999. In FY24, the company paid $3.8 billion worth of dividends to shareholders. The company offers a quarterly dividend of $3.00 per share and has a dividend yield of 1.87%, as of February 13.
5. Wells Fargo & Company (NYSE:WFC)
Number of Hedge Fund Holders: 72
Wells Fargo & Company (NYSE:WFC) is a California-based financial services company that serves over 70 million customers globally. While consumer banking remains the company’s primary revenue driver, its investment banking segment is emerging as a key growth factor, with investment banking fees increasing by 59% year over year in the most recent quarter.
In the fourth quarter of 2024, Wells Fargo & Company (NYSE:WFC) reported revenue of $20.3 billion, which fell slightly by 0.5% from the same period last year. However, the company’s net income grew to $5.07 billion, from $3.4 billion in the prior-year period. It reported robust growth in fee-based revenue, which rose 15% year over year, and helped counterbalance the anticipated decline in net interest income. Operating expenses declined compared to the prior year, while credit trends remained relatively stable. The company maintained substantial excess capital, ending the year with an 11.1% CET1 ratio.
Wells Fargo & Company (NYSE:WFC) has recently prioritized strengthening regulatory compliance and improving its risk management framework. The company is also investing in technological advancements to maintain its competitive edge, especially against nonbank competitors that operate with fewer regulatory restrictions. Its long-term success is driven by a combination of regulatory adherence, effective capital management, strategic positioning, and robust risk oversight.
Wells Fargo & Company (NYSE:WFC) is one of the best dividend stocks on our list as the company has been making regular dividend payments since 1988. Its quarterly dividend currently comes in at $0.40 per share for a dividend yield of 2.03%, as of February 13.
4. The Charles Schwab Corporation (NYSE:SCHW)
Number of Hedge Fund Holders: 74
The Charles Schwab Corporation (NYSE:SCHW) is an American multinational financial services company that offers investing and commercial banking services to its consumers. On January 13, the company introduced the Schwab Core Bond ETF, marking its second actively managed fixed-income ETF. This follows the launch of the Schwab Ultra-Short Income ETF in August 2024. The new offering allows investors to benefit from the firm’s portfolio management expertise while also leveraging the advantages of an ETF structure.
In the fourth quarter of 2024, The Charles Schwab Corporation (NYSE:SCHW) reported revenue of $5.3 billion, which showed a 20% growth from the same period last year. Revenue growth was driven by increased client activity, as the number of active brokerage accounts grew by 5% to 36.5 million, highlighting the company’s success in attracting new clients with competitive services. The ongoing integration of TD Ameritrade further strengthened its position, adding $1.6 trillion in client assets to Schwab’s platform. Net interest revenue totaled $2.53 billion, while asset management and administration fees generated $1.5 billion.
The Charles Schwab Corporation (NYSE:SCHW)’s cash position also remained strong in the most recent quarter. The company ended the quarter with over $42 million available in cash and cash equivalents, compared with $35 million in the previous quarter. On January 29, the company declared an 8% hike in its quarterly dividend to $0.27 per share. The stock supports a dividend yield of 1.33%, as of February 13. It is one of the best dividend stocks on our list as the company has maintained its regular dividends since 1990.
3. Citigroup Inc. (NYSE:C)
Number of Hedge Fund Holders: 88
An American multinational investment bank, Citigroup Inc. (NYSE:C) ranks third on our list of the best dividend stocks from the banking sector. In fiscal year 2024, the company achieved a nearly 40% increase in net income, totaling $12.7 billion and surpassing its annual revenue target. This growth was fueled by strong performances across its Services, Wealth, and US Personal Banking divisions. The company maintained expenses within its projected range, improved its efficiency ratio, and successfully completed a significant reorganization. Annual revenue reached $81.1 billion, marking a 3% year-over-year increase.
In the past 12 months, Citigroup Inc. (NYSE:C) has outperformed the broader market, surging by over 51%. The company is undergoing a multi-year restructuring, streamlining its operations by exiting complex business segments and focusing on areas that can generate returns at or above its cost of capital. Over the past three years, it has made notable progress in strengthening risk management, compliance, and accountability.
Citigroup Inc. (NYSE:C) has maintained a strong track record of returning capital to shareholders through consistent dividend payments. In 2024, it distributed $6.7 billion via dividends and share repurchases. With a payout ratio of 58%, its dividend program remains sustainable. In addition, the company has upheld regular dividend payments for 34 consecutive years and currently offers a quarterly dividend of $0.56 per share. As of February 13, the stock has a dividend yield of 2.74%.
2. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 98
Bank of America Corporation (NYSE:BAC) is a multinational investment bank and financial services company, based in North Carolina. It is one of the best dividend stocks on our list as the company has never missed a dividend in 27 years. The company offers a quarterly dividend of $0.26 per share and has a dividend yield of 2.74%.
In the fourth quarter of 2024, Bank of America Corporation (NYSE:BAC) saw a rise in revenue to $25.3 billion, up from $22 billion in the same quarter last year. Net income more than doubled, reaching $6.7 billion, compared to $3.1 billion in the previous year. The bank also grew its customer base, adding 213,000 new consumer checking accounts, continuing its streak of six consecutive years of quarterly growth. Furthermore, it returned $2 billion to shareholders through dividends.
In the past 12 months, Bank of America Corporation (NYSE:BAC) has delivered an over 41% return to shareholders and its YRD returns came in at over 4.3%. The company has several competitive advantages that strengthen its market position and protect it from rivals, including both traditional banks and fintech firms. Its broad distribution network, which combines a strong digital platform with a widespread branch presence, enables the bank to expand its low-cost deposit base and attract new customers, driving revenue growth. In addition, its large scale allows for efficient cost management, ensuring steady profitability. The bank’s well-known brand further enhances its attractiveness to current and prospective clients.
1. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Fund Holders: 105
JPMorgan Chase & Co. (NYSE:JPM) is one of the largest banks in the US. The company excels in commercial banking, financial transaction processing, and asset management. In FY24, the company achieved impressive results, reporting a record annual profit of $58.5 billion, which was an 18% increase from the previous year. This growth was largely driven by the bank’s dealmakers and traders capitalizing on a market rebound in the fourth quarter. However, its net interest income (NII) fell by 3% year-over-year to $23.5 billion in Q4 2024, marking its first decline since 2021.
Since the start of 2025, JPMorgan Chase & Co. (NYSE:JPM) has delivered a nearly 15% return to shareholders, compared with a just 4% return of the broader market. Its success has been largely attributed to its focus on investment banking and wealth management. In Q4 2024, investment banking fees surged by 49% from the previous year, driven by strong client engagement. Meanwhile, the Asset & Wealth Management division saw a 25% increase in net income, reaching $1.5 billion, fueled by record client inflows that boosted assets under management.
JPMorgan Chase & Co. (NYSE:JPM) is well-regarded as a top dividend stock, consistently distributing dividends to shareholders since 1972. Demonstrating its commitment to rewarding investors, it paid $3.5 billion in dividends during the most recent quarter. The company offers a quarterly dividend of $1.25 per share and has a dividend yield of 1.81%, as of February 13.
Overall JPMorgan Chase & Co. (NYSE:JPM) ranks first on our list of the best dividend stocks from the banking sector. While we acknowledge the potential for JPM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than JPM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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