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.
READ ALSO: 10 AI Stocks That Will Skyrocket and 15 AI News That Broke The Internet.
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.
8. Citizens Financial Group, Inc. (NYSE:CFG)
Dividend Yield as of December 6: 3.59%
Number of Hedge Fund Holders: 46
Citizens Financial Group, Inc. (NYSE:CFG) is an American bank whose Consumer Banking segment covers everything from deposit accounts and mortgages to credit cards, loans, and wealth management services. Its Commercial Banking side focuses on lending, leasing, treasury management, and risk management solutions for industries like healthcare, technology, and real estate. Citizens Financial Group, Inc. (NYSE:CFG) certainly deserves a spot when discussing the best bank stocks. The bank has massive presence across the US, with 1,000 branches, $219.7 billion in total assets and $175.2 billion in deposits as of September 30, 2024.
In the third quarter, Citizens Financial Group, Inc. (NYSE:CFG) generated a net income of $392 million, with earnings per share of $0.79. The private banking deposits rose to $5.6 billion, up from $4 billion in the last quarter, and assets under management came in at $4.1 billion. CFG’s private banking segment reached break-even by the middle of the quarter and is expected to start adding to earnings in the fourth quarter. The Q4 forecast looks strong, with a nice rebound in net interest income (NII) and fees, giving CFG positive operating leverage. The bank expects credit to stay stable and will keep buying back shares.
Given its strong capital position, Citizens Financial Group, Inc. (NYSE:CFG) repurchased $325 million worth of common shares in Q3 2024. When you factor in dividends, the bank returned a total of $516 million to shareholders in the third quarter. This included a quarterly dividend payment of $0.42 per share distributed on November 13.
Insider Monkey’s Q3 data suggested that Citizens Financial Group, Inc. (NYSE:CFG) was found in 46 hedge fund portfolios, with Cliff Asness’ AQR Capital Management holding the biggest stake. Asness owns 4.6 million shares of CFG valued at almost $190 million.
7. U.S. Bancorp (NYSE:USB)
Dividend Yield as of December 6: 3.84%
Number of Hedge Fund Holders: 46
U.S. Bancorp (NYSE:USB) is a financial services holding company offering multiple services, including banking, lending, asset management, and payment solutions. On November 7, Citigroup analyst Keith Horowitz upgraded USB stock to Buy from Neutral and raised the 12-month price target to $65 from $49. The Citi analyst believes the bank is improving its expenses, getting back to growth, and expects its profits from loans and deposits to recover as deposit costs come down.
At the end of October 2024, U.S. Bancorp (NYSE:USB) announced that it is restructuring its payments business into two divisions – Payments: Merchant and Institutional (PMI), handling merchant services, corporate payments, and Payments Europe, and Payments: Consumer and Small Business (PCS), managing credit and debit cards, Elan, and co-brand programs. USB Chairman and CEO Andy Cecere said this shift will help the company grow faster and maximize returns on its recent investments.
In the third quarter, U.S. Bancorp (NYSE:USB) reported earnings of $1.03 per share and total revenue of $6.9 billion. The bank saw strong growth in net interest income, made good progress in fee-based business areas, and kept expenses under control. This led to modest positive revenue growth compared to the same time last year. Revenue growth from the previous quarter came from a better loan mix, fixed asset repricing, smart liability management, and strategic adjustments to the investment portfolio.
U.S. Bancorp (NYSE:USB) is one of the best bank stocks to add to an income portfolio. Why? Its 14th consecutive year of dividend growth speaks for itself. On September 12, USB raised its quarterly dividend by 2% from $0.49 per share to $0.50. The dividend was distributed on October 15.
6. HSBC Holdings plc (NYSE:HSBC)
Dividend Yield as of December 6: 4.16%
Number of Hedge Fund Holders: 14
HSBC Holdings plc (NYSE:HSBC), ranking 6th on our list of the best bank stocks, provides a wide range of financial services, including retail banking, wealth management, global asset management services, commercial lending, investment management, and private wealth solutions.
Although HSBC Holdings plc (NYSE:HSBC) is a globally diversified company, its operations are largely driven by one region: Asia, which accounts for about half of its revenue. The other half of HSBC’s business comes from various countries, generating income through services like commercial banking and wealth management. Recently, the company has also taken steps to further strengthen its focus on Asia.
HSBC Holdings plc (NYSE:HSBC)’s Q3 revenue came in at $17 billion, up $1.1 billion from the same quarter last year and $0.3 billion higher than the previous quarter, showing positive momentum in the business. The bank also announced $4.8 billion in shareholder returns, which includes a third interim dividend of $0.10 per share and a share buyback of up to $3 billion. HSBC plans to wrap up the buyback ahead of full-year results in February. After a steady third quarter and with a low PE ratio, the stock looks undervalued and ready for growth.
HSBC Holdings plc (NYSE:HSBC) is making big changes to streamline its operations and tackle concerns about growth in a challenging market. They’re planning senior-level job cuts, aiming to save $300 million, and have reorganized their banking structure by merging commercial and institutional banking under Michael Roberts, while creating a new wealth division led by Barry O’Byrne. Starting January 2025, the bank will split into East and West divisions, with Hong Kong and the UK operating independently.
Billionaire Ken Griffin’s Citadel Investment Group is the leading position holder in HSBC, owning 687,682 shares worth $31 million as of September 2024. Overall, HSBC Holdings plc (NYSE:HSBC) stock was held by 14 hedge funds in the third quarter.
5. NatWest Group plc (NYSE:NWG)
Dividend Yield as of December 6: 4.20%
Number of Hedge Fund Holders: 15
NatWest Group plc (NYSE:NWG) specializes in banking and financial services in the UK and globally, operating through Retail Banking, Private Banking, and Commercial & Institutional segments. NatWest Group had a strong first half of 2024, and its disciplined growth strategy was boosted by the acquisition of a mortgage portfolio from Metro Bank and the acquisition of retail banking assets and liabilities from Sainsbury’s. The bank plans to pay ordinary dividends of about 40% of attributable profit.
The bank’s stock has grown a whopping 84.55% year-to-date as of December 3, 2024. L1 Long Short Fund highlighted NatWest as the largest commercial lender in the UK and the second-largest retail bank. The fund believes NatWest is well-positioned to benefit from improving margins, housing, and economic activity, projecting 8% annual EPS growth over the next three years. Here is what the firm said about the company in its Q3 2024 investor letter:
“NatWest Group plc (NYSE:NWG): NatWest is the largest commercial lender in the U.K. (20% share) and the second largest U.K. retail bank with ~13% of all mortgages. We see NatWest as best positioned in the U.K. Banking sector to benefit from improving margin trends, with topline growth supported by a rebound in U.K. housing and economic activity. Moreover, with significant buybacks owing to a strong capital position, NatWest should see ~8% EPS growth p.a. over the next three years vs. ~2% expected growth for CBA. Although CBA enjoys a more dominant market position in Australia vs. NatWest in the U.K., it appears overvalued in our view as it trades on ~24x FY25 P/E (historical highs) compared to only ~7x for NatWest.
NatWest (Long +10%) shares rallied on strong quarterly results including earnings ~28% ahead of consensus expectations and upgraded guidance driven by higher-than-expected revenues with net interest margin expanding 5bps. NatWest is the U.K.’s second largest retail bank with ~13% mortgage share and the U.K.’s largest commercial lender with ~20% share. In our view, NatWest leads the U.K. Banking sector with improving underlying operating trends, a superior mortgage margin trajectory and increasing interest rate hedge income. Importantly, management expects ongoing net interest margin expansion despite the impact of BoE rate cuts. We believe the company remains significantly undervalued, trading on an FY25 P/E multiple of only ~7x and a price to tangible book value ratio (P/TBV) of only ~1x. This is despite generating a 15% return on tangible equity and ~8% p.a. earnings growth over the next three years based on consensus expectations. We find these metrics and attributes very compelling, especially when compared to Australian banks.”
NatWest Group plc (NYSE:NWG)’s CEO, Paul Thwaite, announced on December 3 that the bank is about to make a quick comeback to private ownership, with the UK government likely selling off its last shares by mid-2025. Thwaite called it a major moment for both the bank’s team and the whole banking world, signaling the end of the 2008 financial crisis fallout. Back in the day, the UK government bailed out NatWest (then called Royal Bank of Scotland) with nearly £46 billion, taking control of around 84% of the bank. However, over the past year, the government’s stake has dropped from 38% in December 2023 to just under 11% today, thanks to a fast-paced sell-off and share buy-backs.
Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital held the biggest stake in NatWest Group plc (NYSE:NWG) at the end of the third quarter, comprising 1.5 million shares worth nearly $20 million. Among the hedge funds tracked by Insider Monkey, a total of 15 funds reported owning stakes in NWG at the conclusion of the third quarter.
4. Truist Financial Corporation (NYSE:TFC)
Dividend Yield as of December 6: 4.41%
Number of Hedge Fund Holders: 45
Truist Financial Corporation (NYSE:TFC) provides a range of banking and financial services across the Southeastern and Mid-Atlantic US. The company offers several deposit products, lending services, wealth management, insurance, and investment solutions. According to a recent SEC filing in December, Boyer K. David Jr., a director at Truist Financial Corp, sold 4,966 shares of the company’s stock at an average price of $46.203, amounting to about $229,444. After the sale, Boyer still owns 11,245 shares directly and holds another 4,071 shares through a trust.
On a positive note, Truist Financial Corporation (NYSE:TFC) returned $1.2 billion in capital to its shareholders in Q3, which includes a common dividend and the repurchase of $500 million in common stock, as part of the $5 billion repurchase plan approved by the board at the end of June 2024. The company has shelled out dividend payments for 52 consecutive years. Given its solid dividend potential, Truist Financial Corporation (NYSE:TFC) is placed 4th on our list of the best bank stocks.
Beyond rewarding shareholders, Truist is also focused on giving back to the community. The company has rolled out a new initiative, Truist Cares for Western North Carolina, pledging $725 million over the next three years to help the region recover from Hurricane Helene. The funding will go towards supporting small businesses, housing, and infrastructure, with a mix of capital for local businesses, donations from the Truist Foundation, and support from Truist employees. The bank will work closely with local partners and organizations to figure out what the community needs most and tailor its efforts accordingly. The first resources should be available by December 2024.
In Q3 2024, Truist Financial Corporation (NYSE:TFC) saw its best capital markets performance since 2021, with a 79% year-over-year increase in investment banking revenues. The bank reached record highs in areas like equity capital markets and asset securitization, thanks to stronger client relationships and strategic hires. TFC feels that with its strong capital position right now, it is in a great spot to use future earnings and capital gains to drive balance sheet growth and return a substantial amount of capital to shareholders.
During the third quarter of 2024, Harris Associates was the largest stakeholder of Truist Financial Corporation (NYSE:TFC), owning a position worth around $233.5 million. Overall, 45 hedge funds held long positions in the stock.
3. Bank of Montreal (NYSE:BMO)
Dividend Yield as of December 6: 4.62%
Number of Hedge Fund Holders: 14
Bank of Montreal (NYSE:BMO) operates mainly in North America, where it provides financial services including personal and commercial banking, wealth management, and capital markets.
Bank of Montreal (NYSE:BMO) announced a quarterly dividend of C$1.59 per share on December 5, marking a 2.6% increase from the previous dividend of C$1.55. The dividend will be paid on February 26 to shareholders on record as of January 30. This bank has consistently paid dividends to shareholders since 1829 and has increased its payouts annually for the past eight years. That puts BMO on our list of the best bank stocks for a dividend portfolio.
In BMO’s Q4 2024 earnings call, the bank shared that a year ago, it expected higher interest rates and a slowing economy to make things more difficult for business activity, loan demand, and credit. To stay ahead, Bank of Montreal (NYSE:BMO) took early action, managing costs while still supporting customers, which led to solid results. However, credit performance was worse than anticipated, resulting in a drop in net income for the year to $7.4 billion and earnings per share to $9.68. Despite the tough year, there’s a lot to be proud of. The bank saw a 5% increase in pre-tax earnings to $13.4 billion, improved efficiency, and grew its core customer base, with deposits rising by $61 billion or 9%. BMO expects provisions to ease off through 2025.
According to Insider Monkey’s third-quarter data, Bank of Montreal (NYSE:BMO) was present in 14 hedge fund portfolios. Arrowstreet Capital is the largest position holder in the bank, with nearly 1.5 million shares worth $133.2 million.
2. The Toronto-Dominion Bank (NYSE:TD)
Dividend Yield as of December 6: 5.18%
Number of Hedge Fund Holders: 23
The Toronto-Dominion Bank (NYSE:TD) is a major financial institution offering a wide range of services across Canada, the United States, and internationally. TD provides everyday banking, credit cards, auto loans, investment advice, and insurance products.
The bank has faced significant challenges recently. The Toronto-Dominion Bank (NYSE:TD) has suspended its medium-term financial targets as it undergoes a strategic review following a major settlement over money-laundering violations. The review comes as the bank prepares for a leadership change, with incoming CEO Raymond Chun tasked with navigating the fallout. TD is reassessing its growth strategy, productivity, and capital allocation after agreeing to a $3.1 billion settlement with US authorities over its failure to prevent money laundering. The stock is down by over 14% since the start of 2024.
However, The Toronto-Dominion Bank (NYSE:TD) had a strong third quarter, with revenue up 8% compared to last year. This growth came from higher fee income, solid credit performance, and impressive results in Canadian Personal and Commercial Banking. In the fourth quarter, expenses were higher due to investments in risk and control infrastructure and some legal costs, totaling around $150 million. The bank also faced record catastrophic claims in its insurance business and an increase in impaired PCLs (provision for credit losses) in its non-retail lending portfolios. Earnings for the fourth quarter were $3.2 billion, with EPS at $1.72, both down 8% and 5% year-over-year, respectively. Despite these challenges, the bank is confident in its earnings potential and has announced a $0.03 dividend increase, raising it to $1.05 per share. Shareholders of record by January 10 will get paid on January 31.
TD is a popular name among Wall Street hedge funds. Leading funds like Arrowstreet Capital, Marshall Wace LLP, and Renaissance Technologies hold stakes in the company.
1. The Bank of Nova Scotia (NYSE:BNS)
Dividend Yield as of December 6: 5.38%
Number of Hedge Fund Holders: 18
The Bank of Nova Scotia (NYSE:BNS) offers a wide variety of banking and financial services in Canada, the US, and internationally. It operates through Canadian Banking, International Banking, Global Wealth Management, and Global Banking and Markets segments. About 44% of the bank’s clients with term deposits are now primary clients as of Q4 2024, which is a 4.4% increase this year. On top of that, 85% of clients renewing their term deposits stuck with The Bank of Nova Scotia (NYSE:BNS), either directly renewing or moving to new investments and products. The stock is up nearly 26% year-to-date as of December 6.
In its Q4 2024 earnings call, The Bank of Nova Scotia (NYSE:BNS) reported that overall revenue in 2024 went up 6% compared to the previous year, while expenses increased by 4%, giving the bank a 2.3% positive operating leverage. Fee and commission revenue also saw a 5% rise. The Canadian Banking segment had a solid performance, with earnings growing 7% to $4.3 billion, driven by deposit growth and improved margins, though there were higher expenses and PCLs. BNS also had a return on equity of 20.8%.
On December 3, The Bank of Nova Scotia (NYSE:BNS) declared a C$1.06 per share quarterly dividend. Shareholders who are on record by January 7, 2025, will receive the payout on January 29, 2025. It is one of the best bank stocks, with a steady dividend history and an attractive yield for investors.
Insider Monkey’s third-quarter database shows that 18 hedge funds were bullish on The Bank of Nova Scotia (NYSE:BNS), an increase from 14 funds in the previous quarter.
Overall, The Bank of Nova Scotia (NYSE:BNS) ranks first on our list of the best bank stocks. While we acknowledge the potential of BNS to grow, our conviction lies in the belief that certain 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 BNS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure. None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and investors. Please subscribe to our daily free newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
