In this article, we will take a look at some of the best dividend stocks from the financial sector.
In 2024, financial stocks have led the market, delivering one of the strongest performances among all sectors. While the broader financial sector is expected to continue its upward trajectory, certain stocks within the group appear even better positioned for growth. The broader market’s financial sector has climbed nearly 30% this year, surpassing the overall market and even outperforming the technology sector, which includes many of the high-profile mega-cap tech stocks. The financial index is up by over 7% since the start of 2025.
The US banking sector continued to expand in the third quarter of 2024, despite sluggish loan growth. The industry saw a 1.4% sequential increase in total assets during the period. Collectively, the 50 largest US banks added $377.22 billion in aggregate assets during the third quarter, with 35 institutions reporting growth, according to data from S&P Global Market Intelligence. This marked a turnaround from the second quarter when the top 50 banks saw a combined decline of $128.01 billion from the first quarter of the year. The report further mentioned that as of September 30, the total assets of the 50 largest US banks stood at $23.985 trillion. Among the 39 banks with assets ranging from $50 billion to $500 billion, 25 recorded an increase in assets during the third quarter.
Also read: 10 Low PE High Dividend Stocks to Buy Now
Financial stocks experienced a sharp and widespread rally following President-elect Donald Trump’s victory in the 2024 presidential election. This surge was largely fueled by market optimism surrounding a potentially more relaxed regulatory environment in 2025, particularly in relation to mergers and acquisitions. In November, the median total return for the 211 banks tracked by S&P Global Market Intelligence climbed to 13.4%, significantly outpacing the broader market’s 5.9% gain.
Another key factor influencing bank performance was the Federal Reserve’s release of parameters for its annual industry stress test. The 2025 test outlined less severe economic shocks than previous years, although it still projected a rise in U.S. unemployment to 10% and a 33% decline in home prices. Compared to prior tests, the latest scenario included milder increases in joblessness and less drastic drops in stock and real estate values. Barclays analyst Jason Goldberg emphasized these adjustments in his report, “2025 Stress Test: Scenarios Easier than Past Two Years.” Meanwhile, Bank of America analyst Ebrahim Poonawala suggested that the test’s reduced stringency and greater predictability could lead banks to hold smaller capital buffers later in the year.
The financial sector is cyclical, meaning its performance is closely tied to the overall health of the economy. The US economy has maintained steady momentum, increasing the likelihood of a “soft landing”—a scenario that would help ease concerns about a potential mild recession that could weigh on financial stocks. According to analysts, a key shift heading into 2025 compared to previous years is the outlook for interest rates. The second half of 2024 marked the start of a new rate cycle, with the Federal Reserve implementing its first rate cut since the early stages of the pandemic. For banks, interest rate changes present both opportunities and challenges. While higher rates can boost net interest margins, rate fluctuations can also impact lending activity and overall profitability.
Investor enthusiasm for financial stocks is on the rise, driven in large part by their appealing dividend payouts. According to a report by Janus Henderson, the financial sector saw headline growth of 7.7% growth in dividend payouts on a YoY basis. The report also mentioned that the industry paid $72 billion in dividends in the third quarter of 2024. Given this, we will take a look at some of the best dividend stocks from the financial sector.
photo by scott graham on Unsplash
Our Methodology:
For this list, we scanned Insider Monkey’s database of 900 hedge funds as of Q3 2024 and identified dividend stocks from the finance sector. These companies offer a wide range of financial services, including banking, insurance, investment management, and financial planning. The stocks mentioned below also offer stable dividend yields. From the resultant list, we picked 12 stocks with the highest number of hedge fund investors and ranked them in ascending order of hedge funds’ sentiment towards them.
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).
12. 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 a New York-based financial services company that was established in 2007 through the merger of the Bank of New York and Mellon Financial Corporation and became the largest custodian bank globally. Unlike conventional banks that offer commercial and consumer services such as accepting deposits and issuing loans, BNY Mellon focuses on providing security services to asset owners, including other financial institutions.
The Bank of New York Mellon Corporation (NYSE:BK) delivered robust earnings in the fourth quarter of 2024, with revenue reaching $4.8 billion—an 11% increase compared to the same period the previous year. For the full fiscal year, net income climbed to $4.3 billion, marking a significant 43% surge from 2023. Over the course of the year, it introduced a new commercial coverage model, developed innovative client-focused products and solutions, and undertook a brand refresh. In addition, it announced and completed its first acquisition in several years while initiating a phased transition to its strategic platforms operating model. The company also remained committed to strengthening its corporate culture and continued attracting top talent to enhance its workforce.
In addition to delivering strong earnings, The Bank of New York Mellon Corporation (NYSE:BK) also remained committed to returning value to shareholders. In the latest quarter, the company returned $349 million to shareholders through dividends. It has also raised its payouts for 14 years in a row, which makes BK one of the best dividend stocks on our list. The company offers a quarterly dividend of $0.47 per share and has a dividend yield of 2.14%, as of February 16.
11. Truist Financial Corporation (NYSE:TFC)
Number of Hedge Fund Holders: 45
Truist Financial Corporation (NYSE:TFC) is an American bank holding company that offers a wide range of services, including commercial banking, savings accounts, mortgages, and credit cards. In the fourth quarter of 2024, the company generated $5.11 billion in revenue, reflecting a 5% increase from the same period the previous year. The company reported a net income of $1.28 billion for the quarter. Average earning assets expanded by $6.5 billion, or 1.4%, primarily driven by a $7.7 billion, or 6.6%, rise in average securities. Meanwhile, average deposits grew by $5.7 billion, or 1.5%, and average short-term borrowings climbed by $4.2 billion, or 20%. In contrast, average long-term debt declined by $1.2 billion, or 3.4%.
Regulatory compliance remains a key focus for Truist Financial Corporation (NYSE:TFC) as it adheres to enhanced prudential standards and capital requirements applicable to a Category III banking institution. Meeting these obligations is essential for maintaining operations and supporting strategic initiatives. However, as one of the top 10 banks in the US, Truist holds a strong market presence in fast-growing regions like Florida and Georgia. Recently, the bank has emphasized digital innovation and technological advancements, strengthening its service offerings to remain competitive, particularly against fintech firms. In the past 12 months, the stock has surged by nearly 30%.
Truist Financial Corporation (NYSE:TFC) maintains a strong dividend profile, reflecting its dedication to delivering value to shareholders. It has been making regular dividend payments to shareholders since 1997, which makes it one of the best dividend stocks. In 2024, the company returned $3.8 billion to common shareholders through dividends and share buybacks. This included $500 million in common share repurchases, resulting in a dividend payout ratio of 57% and a total payout ratio of 98%. The company’s quarterly dividend comes in at $0.52 per share for a dividend yield of 4.44%, as recorded on February 16.
10. Morgan Stanley (NYSE:MS)
Number of Hedge Fund Holders: 55
Morgan Stanley (NYSE:MS) is a global financial services company that offers a wide range of related services and products to its consumers. Recently, the company has focused on growing its wealth management division, strengthening its technological infrastructure, and ensuring financial stability to align with changing regulations. Its progress has been fueled by efforts to enhance client services through technological innovation while managing asset expansion and effectively addressing regulatory challenges and risks. The stock has soared by almost 61% over the past year.
In the fourth quarter of 2024, Morgan Stanley (NYSE:MS) posted revenue of $16.2 billion, marking a 25% increase from the same period a year earlier. Net income climbed to $3.7 billion, or $2.22 per diluted share, compared to $1.5 billion, or $0.85 per share, in the previous year. Total client assets in Wealth and Investment Management reached $7.9 trillion, driven by strong market performance and solid net inflows. The company remains focused on four core pillars—strategy, culture, financial strength, and growth—to support its Integrated Firm model and drive long-term value for shareholders.
Morgan Stanley (NYSE:MS) remained committed to returning value to shareholders, as the company paid $150 million to investors through dividends in the most recent quarter. The company offers a quarterly dividend of $0.925 per share and has a dividend yield of 2.66%, as of February 16.
