Income investors can look to these bank stocks for 3%-plus yields.
There’s a lot of trepidation on Wall Street in 2022, thanks to the prospect of rising interest rates and the resulting volatility we’ve seen in the stock market. However, rising rates aren’t always a bad thing. For starters, the reason the Federal Reserve has begun to talk earnestly about higher interest rates is because the economy is at “full employment” and can likely shoulder any increase without stumbling. Furthermore, some businesses — particularly financial firms that offer loans — actually benefit from higher margins and a better return on their capital under higher rates. Here are seven dividend-paying bank stocks to buy that are all looking strong right now, despite headwinds elsewhere on Wall Street. They are substantial in size, with at least a $1 billion market valuation, and offer a 3% dividend yield or better.
AllianceBernstein Holding LP (ticker: AB)
Asset management firm AllianceBernstein offers research and investment services to wealthy individuals and institutional clients through pension services, trusts and estates, and 401(k) management. Its respected brand and expertise have helped it maintain an enviable track record of earnings and revenue expansion over the years, including a projected increase of more than 20% for fiscal 2021 and a nearly 10% jump in revenue based on forecasts for fiscal 2022. AB boasts some $700 billion in assets under management, and it can offer a huge dividend to shareholders, thanks to its well-run operations and loyal client base.
Dividend yield: 7.7%
Bank of Montreal (BMO)
As you no doubt guessed, Bank of Montreal is a diversified financial services firm based north of the border in Canada. But its business will look familiar to U.S. investors, involving checking and savings accounts, credit cards, mortgages, small business loans and the like. It is a $100 billion outfit that operates about 900 bank branches and 3,300 automated banking machines in Canada and the northern U.S., with more than 200 years of operating history. And thanks to the Canadian economy’s reliance on energy and mining, the inflationary pressures that have lifted commodity prices have been a boon for the nation — as well as this major bank, which has tacked on more than 50% gains in the last 12 months. But most attractive of all to dividend investors is its hefty quarterly dividends, which add up to a generous yield at current prices.
Dividend yield: 3.6%
Investors Bancorp Inc. (ISBC)
Though it may sound like an upscale investment manager, ISBC operates as a more traditional bank holding company servicing individuals and businesses in and around New York and New Jersey. We’re talking about a company valued at only $4 billion that largely deals in commercial real estate loans, residential mortgages, life insurance and similar products offered through a network of about 150 branches. A steady stream of revenue from these reliable banking operations supports an above-average dividend that has increased substantially from 8 cents quarterly five years ago to 14 cents quarterly at present. That’s on top of recent share-price appreciation of more than 35% over the last 12 months, showing that when it comes to banking stocks, bigger isn’t always better.
Dividend yield: 3.7%
KeyCorp (KEY)
KeyCorp is a $25 billion financial firm that is headquartered in Cleveland but operates an expansive network of 1,000 branches and 1,400 ATMs across 15 states. Unlike major investment banks that often take on sophisticated or risky endeavors, a regional bank stock like KEY is fundamentally involved in the more day-to-day services of normal folks — mortgages, savings accounts and the like. That may not allow for flashy profits based on new product innovations or daring traders who make a bundle, but it also cuts out the associated risk that comes with those efforts. Besides, KEY stock is up more than 40% in the last year in addition to offering a nice dividend, so there’s clearly profit potential for investors in this under-the-radar bank stock.
Dividend yield: 2.9%
Navient Corp. (NAVI)
Navient isn’t a traditional bank, but rather a student loan specialist. This stock saw a lot of volatility around the election of President Biden on the hope of some kind of student loan forgiveness effort — and while chatter continued across the pandemic, particularly as younger Americans struggled with repayment, no policies are anywhere near entering into law. So it is the same as ever for NAVI as it continues to offer loans to folks who are dealing with ever-increasing college costs. Shares are up about 50% in the last 12 months and have more than doubled from their lows from a few years back. And with a dividend of 64 cents annually that is a mere 20% of total earnings, investors can depend on this income investment offering continued paydays for the foreseeable future.
Dividend yield: 3.5%
People’s United Financial Inc. (PBCT)
Midsize bank People’s United has just over 400 branches in the northeast U.S., including in the New York City area, Massachusetts, Vermont, Maine and New Hampshire. As with other bank stocks on this list, the strength of PBCT isn’t that it’s particularly flashy, but that it’s a reliable financial firm that is involved with the core business of lending. Shares have slightly outperformed with about 25% gains over the last year, helped in part by the prospect of higher interest rates that could continue to lift margins on loans. Its reliable quarterly dividend of just over 18 cents is also good for a yield almost three times that of the typical S&P 500 component.
Dividend yield: 3.4%
Principal Financial Group Inc. (PFG)
Principal is a retirement and asset management giant that serves both institutions and individuals, with some $714 billion in total assets under its belt. In fact, you may have a Principal product as part of your own retirement planning, either as a 401(k) administrator or as a branded mutual fund you hold in your portfolio. Investing in PFG allows you to tap into the reliable demand for these investment services and share in the profits it rakes in by charging small administrative fees. Quarterly dividends of 64 cents are less than half the earnings the company takes in, and thus likely to persist regardless of any short-term market volatility.
Dividend yield: 3.3%
7 bank stocks to buy for the dividends:
— AllianceBernstein Holding LP (AB)
— Bank of Montreal (BMO)
— Investors Bancorp Inc. (ISBC)
— KeyCorp (KEY)
— Navient Corp. (NAVI)
— People’s United Financial Inc. (PBCT)
— Principal Financial Group Inc. (PFG)
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7 Bank Stocks to Buy for the Dividends originally appeared on usnews.com
Update 02/09/22: This story was published at an earlier date and has been updated with new information.
