We recently published a list of 12 Best Fortune 500 Dividend Stocks To Buy Right Now. In this article, we are going to take a look at where Bank of America Corporation (NYSE:BAC) stands against other best Fortune 500 dividend stocks to buy right now.
Compiled and published by Fortune Magazine, the Fortune 500 is an annual list that ranks the biggest US companies by revenue. In total, the Fortune 500 companies represent two-thirds of the US GDP with $18.8 trillion in revenues, $1.7 trillion in profits, and $43 trillion in market value (as of March 28, 2024), and they employ a workforce of 31 million around the globe.
READ ALSO: 15 Best NASDAQ Dividend Stocks to Buy
2024 proved to be a big year for large-cap stocks, as the broader US market achieved gains of nearly 25%, piggybacking on a 26% performance the year before. Large-cap stock funds, with the heaviest tilt toward growth stocks, performed the best last year, even as the market’s rally somewhat broadened from the handful of mega tech companies that have led much of the bull market.
However, the tailwinds that propelled the market to new heights are beginning to recede, as the rate of monetary policy easing slows down, long-term interests swing upward, inflation becomes sticky, and the US economy is slowing down. Moreover, the upcoming presidency of Donald Trump and his much-rumored tariffs could also herald a more volatile period for markets, as they could further fan inflation fears and put pressure on stock prices.
That said, the expected upcoming fluctuation isn’t going to be something that the mega corporations haven’t dealt with before. A 2023 report by J. P. Morgan revealed that despite the considerable volatility during the period, large-cap stocks gained around 162% between 2013 and 2023, galvanized primarily by big tech. Another 2023 report by CNBC unveiled that large US companies outperformed other investments between 2003 and 2023, with average returns of 9.3%. However, it hasn’t always been a smooth ride, as despite the stability and reliability large-cap stocks are known for, investors had to survive drops of 56.8% during the 2007-2009 bear market, 33.9% in 2020, and 25.4% in 2022.
In addition to the few tech giants regularly making headlines with their gains, large-cap dividend stocks could also be an attractive option for investors looking for a reliable, significant, and growing stream of income. According to Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices, the broader US large caps are expected to post an 8% increase in dividend payments in 2025, compared to the 6.4% uptick in 2024, 5.1% gains in 2023, and the 10.8% increase witnessed in 2022.
Large-cap companies tend to have more robust balance sheets compared to their smaller counterparts, enabling them to navigate through market fluctuations more smoothly while also returning value to their shareholders. Corporations in the US have continuously grown their considerable cash stockpiles since the beginning of the pandemic, thanks to the economic resilience we have witnessed recently. A report from treasury advisory firm Carfang Group revealed that as of Q1 2024, US corporations increased their cash holdings to an all-time high of $4.11 trillion, up 12.6% from the same period in 2024 and $1.28 trillion more from their pre-pandemic levels.
Methodology
To collect data for this article, we referred to the top 50 companies among the Fortune Global Rankings. Then, we picked out 12 US-listed companies with the highest dividend yields as of January 13, 2025, and ranked them by their number of hedge fund investors according to the Insider Monkey database as of Q3 2024.
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).
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Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 98
Dividend Yield: 2.32%
Market Cap: $344.5 billion
Bank of America Corporation (NYSE:BAC) ranks second on our list of the best large cap stocks. It is one of the world’s largest financial institutions, serving individuals, small- and middle-market businesses, and large corporations with a full range of banking, investing, asset management, and other financial and risk management products and services.
In Q3 of 2024, Bank of America Corporation (NYSE:BAC) generated $25.5 billion in revenue and earned $6.9 billion in net income after tax, driven by investment banking and trading. The bank’s Investment banking fees jumped 18% YoY to $1.4 billion as increasing confidence among clients spurred them to issue more debt and equity.
Bank of America Corporation (NYSE:BAC) launched its consumer investments business in 2010 and investments from its retail consumers have already swelled to more than $500 billion in assets at the end of 2024. The company is expecting the trend to continue and is aiming to cross the $1 trillion mark in the business in five years. What’s more is that nearly 33% of BAC’s consumer investment accounts are held by Gen Z and millennial clients, who have become more active in investing.
Bank of America Corporation (NYSE:BAC)’s strong deposit base is considered a significant strength in the current high-interest rate environment. The bank’s extensive branch system and robust digital presence enable it to expand its low-cost deposit base and attract new customers. The lender plans to open 165 more branches in the US by the end of 2026, which is expected to boost its investment assets even further.
Bank of America Corporation (NYSE:BAC) has paid and raised its dividend for 11 consecutive years, and maintained a dividend yield of 2.32% as of January 13, 2025. Analysts estimate that the bank will grow earnings by an average of 10% annually for the next three to five years, which could translate to significant dividend increases, making Bank of America Corporation (NYSE:BAC) a solid dividend growth stock in the long term.
Overall, BAC ranks 2nd on our list of best Fortune 500 dividend stocks to buy right now. While we acknowledge the potential for BAC 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 BAC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
