In this article, we will look at the 10 Best Bank Stocks With High Dividends.
In 2023, the US banking industry took a major hit, as Silicon Valley Bank collapsed, followed by the downfall of two other major banks. It was the biggest shake-up the industry had seen since the 2008 financial crisis. Despite the US banking crisis, the past two years have been the best for banks since before the Great Recession. Shocking, right?
Banking Sector Performance 2023
According to McKinsey, banks made $7 trillion in revenue and $1.1 trillion in net income globally during 2023, with a return on tangible equity of 11.7%. They have also strengthened their capital and liquidity, with capital levels at 12.8% and liquidity at 77.2%, both improving from 2022. In fact, banks earned more profit than any other sector worldwide last year. Right now, 14% of banks are making up 80% of the industry’s economic profit, which is a big jump from 11% in 2013. This is nearly five times higher than most other industries, where a few big players usually dominate the performance.
In 2023, global dividends surged to a record $1.66 trillion, marking a 5.0% increase on an underlying basis, according to the Janus Henderson Global Dividend Index. The banking sector played a key role in this growth, delivering record payouts and accounting for half of the global increase in dividends. Higher interest rates allowed many banks to expand their margins, with emerging market banks contributing significantly to this increase – though banks in China didn’t join in the dividend boom.
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Banking Sector in 2024
The banking sector is anticipated to maintain its strong performance this year, with analysts offering an optimistic outlook. On December 4, 2024, Moody’s upgraded the global banking sector from negative to stable. The credit rating giant is positive because G-20 countries are easing up on interest rates and making some monetary adjustments, which should help with the asset quality and liquidity of banks. The economy seems to be stabilizing, and that should help banks recover, especially in terms of deposits. Of course, there are some risks like geopolitical tensions, trade issues, and possible shifts in the US policies under the new president could create uncertainties that might affect the global economy and the banking sector. So, while things are looking better, there is still some uncertainty on the horizon.
A bustling financial district, highlighting the importance of the regional banking services.
Our Methodology
For this article, we used the Finviz stock screener to filter out bank stocks with dividend yields exceeding 3%. We focused on picking stocks with a consistent record of paying dividends, offering dividend growth, and being financially stable to steer clear of yield traps. The list below is ranked in the ascending order of dividend yields, as of December 6. We have also mentioned the number of hedge fund holders in each firm, which was sourced from Insider Monkey’s Q3 2024 database.
At Insider Monkey, we are obsessed with 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. Citigroup Inc. (NYSE:C)
Dividend Yield as of December 6: 3.02%
Number of Hedge Fund Holders: 88
Citigroup Inc. (NYSE:C) is a banking giant which is known for its diversified products and services, including cash management, investment banking, corporate lending, commercial banking, retail banking, trust services, and advisory services. This financial corporation caters to a broad clientele, ranging from individuals, governments, and multinational corporations to financial institutions and high-net-worth clients. The stock is also up by 34.60% year-to-date as of December 3, 2024.
Citigroup Inc. (NYSE:C) had a solid third quarter, earning $3.2 billion in net income, with an EPS of $1.51, which exceeded the Wall Street estimate of $1.31. Revenues came in at $20.3 billion, slightly up by 1%, but when you exclude the effects of divestitures, they actually grew 3%, thanks to gains across all business segments. U.S. Personal Banking performed well, with a 3% revenue increase, and Branded Cards stood out with an impressive 8% growth, driven by more account openings, higher spending, and greater interest-earning balances.
The bank is also making headway in key sectors like healthcare and tech, while an exciting $25 billion private credit partnership with Apollo, announced in September this year, gives Citigroup Inc. (NYSE:C) new ways to handle client financing without tying up its balance sheet. Similarly, American Airlines and Citigroup Inc. (NYSE:C) are strengthening their long-standing partnership, extending it for another decade. Starting in 2026, Citi will be the exclusive issuer of the AAdvantage® co-branded credit card in the US. As part of this expansion, Citi is also taking over the Barclays American Airlines card portfolio, with cardholders transitioning to Citi in 2026. This move will boost Citi’s growth in the credit card and personal banking space.
During the third quarter, Citi distributed $2.1 billion to shareholders through common dividends and stock buybacks. On October 23, the company announced a $0.56 per share dividend for its shareholders, which was paid out on November 22, 2024. The dividend is distributed on a quarterly basis. Citigroup Inc. (NYSE:C) is one of the best bank stocks when it comes to consistent dividend payouts.
Warren Buffett’s Berkshire Hathaway was the most prominent stakeholder of Citigroup as of the end of September 2024. Overall, the stock was found in 88 hedge fund portfolios.
9. Royal Bank of Canada (NYSE:RY)
Dividend Yield as of December 6: 3.26%
Number of Hedge Fund Holders: 22
Royal Bank of Canada (NYSE:RY) is a Toronto-based financial services company that provides banking, lending, investment, wealth management, insurance, and capital markets services to individuals, businesses, institutions, and governments worldwide.
At the end of March 2024, Royal Bank of Canada (NYSE:RY) announced its C$13.5 billion acquisition of HSBC Canada. HSBC Canada has strong fundamentals, with great engagement from both employees and clients. Plus, there are some exciting opportunities to boost revenue, like bringing their retail clients into Royal Bank of Canada (NYSE:RY)’s wealth management and expanding their commercial banking services. Royal Bank posted fourth quarter earnings of $4.2 billion, which includes $265 million contributed by its acquisition of HSBC Canada.
Royal Bank of Canada (NYSE:RY) reported a 7% increase in Q4 2024 net income, reaching C$4.2 billion, driven by strong performances in wealth management, personal banking, insurance, and contributions from HSBC Canada. Revenue rose 19% to C$15.1 billion, strengthened by HSBC Canada, higher net interest income, and mutual fund growth. CEO Dave McKay credited the results to diversified growth, a strong balance sheet, and prudent risk management. The stock has climbed around 33% year-to-date as of December 6, 2024.
On December 4, Royal Bank of Canada (NYSE:RY) announced a 4.2% increase in its dividend, raising it to C$1.48 per share. Shareholders on record as of January 27 will receive the payment on February 24. Royal Bank is one of the best bank stocks when it comes to boosting its dividends. The bank has managed to grow its dividends during the last decade, even through market crashes and the pandemic.
In the third quarter of 2024, 22 hedge funds reported owning stakes in the Royal Bank of Canada (NYSE:RY). Of these funds, Rajiv Jain’s GQG Partners held the biggest position in the company, with 5.7 million shares worth nearly $718 million.
