In March, the collapse of Silicon Valley Bank, or SVB, caused a fuss on Wall Street because of the fear of contagion risk. But roughly a month has passed and, aside from SVB and Signature Bank, we haven’t seen any other failures. To put things into perspective, more than 20 banks failed back in 2013 and more than 150 failed during the worst of the financial crisis, so we are a far cry from significant and widespread closures.
What’s more, the move toward higher interest rates has undeniably created a tailwind for financial stocks. While the higher rates mean it’s costlier for businesses and consumers to borrow, the lenders themselves enjoy higher net margins on those loans as a result.
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These financial stocks often use that cash to support generous dividend payments to shareholders. So if you’re interested in plump dividends and you don’t fear instability in the banking system, check out the following list. Each stock on the list is more than $3 billion in market value, and has a dividend yield of at least 3%.
| Bank stock | Dividend yield |
| JPMorgan Chase & Co. (ticker: JPM) | 3.1% |
| Ares Management Corp. (ARES) | 3.9% |
| HSBC Holdings PLC (HSBC) | 4.6% |
| AllianceBernstein Holding LP (AB) | 8.7% |
| Ally Financial Inc. (ALLY) | 4.6% |
| Bank of New York Mellon Corp. (BK) | 3.3% |
| New York Community Bancorp Inc. (NYCB) | 7.7% |
Best Large Bank Stock: JPMorgan Chase & Co. (JPM)
Entrenched giant JPMorgan is a dominant force in the global financial sector. This megabank has roots dating back to 1799, and is currently the largest U.S. bank by assets. If you’re a long-term income investor interested in dividends, JPM is the kind of financial stock you can believe in for many years to come, regardless of the ebb and flow of the news cycle.
The 2008 financial crisis resulted in a short-lived dividend rollback for JPM as mandated by the Federal Reserve at the time. But it’s worth pointing out that JPM was the first major financial organization in the U.S. to eclipse its pre-crisis dividend levels. Specifically, in 2008 it was paying $1.52 per share annually before lowering that payout during the downturn. But by the end of 2014 it was paying $1.56 per share and currently pays a whopping $4 per share annually.
If you want scale and staying power, JPM is your place to start in the financial sector.
Dividend yield: 3.1%
Ares Management Corp. (ARES)
Ares Management Corp. isn’t a commercial bank. It actually operates more like a hedge fund, commanding about $350 billion in investments around the globe in pursuit of big returns across credit, private equity, real estate and other investments. As those assets pay off, ARES passes on the returns to its shareholders.
In 2023, those returns and the future outlook for performance is looking bright. Shares are up more than 50% from their summer 2022 lows and up more than 20% year to date to make it one of the best performing financial stocks out there. It also proved its commitment to dividends with a massive 26% increase in payouts from 61 cents per quarter to 77 cents per quarter as of this spring.
Dividend yield: 3.9%
HSBC Holdings PLC (HSBC)
London-based megabank HSBC may be recognizable to some U.S. consumers, but is a very international name that provides banking and financial services worldwide. Like other major enterprises in the sector, it operates a diversified business including personal and commercial banking, wealth management and capital markets segments.
Year to date, HSBC has outperformed the S&P 500 with double-digit returns. And while dividends are only paid twice a year, in March and again in August, the annual payout is significantly higher than many U.S. peers and almost three times that of the S&P 500 index on average. If you want to look beyond the fallout of SVB in the U.S. for a more global feel, then HSBC could be a bank stock worth a look.
Dividend yield: 4.6%
[READ: 10 ETFs to Build a Diversified Portfolio.]
AllianceBernstein Holding LP (AB)
Asset manager AllianceBernstein caters to high-net-worth individuals and institutional clients like pension funds. It’s not as large as some of the other money managers out there, but is still substantial at $4 billion in market capitalization and almost $800 billion in assets under management across more than 50 locations worldwide. Perhaps most interesting to dividend investors, however, is the mammoth yield that annualizes to almost five times that of the typical S&P 500 stock.
Dividend yield: 8.7%
Ally Financial Inc. (ALLY)
Born out of the troubled financial arm of General Motors Co. (GM) during the financial crisis more than a decade ago, Ally has grown into its own to become a strong mid-sized banking stock in part because of its early adoption of a “branchless” approach and a strong online presence to complement brick-and-mortar operations. Though smaller, Ally remains specialized in auto finance and consumer lending and thus has benefited from the higher rates on these products lately.
Dividend yield: 4.6%
Bank of New York Mellon Corp. (BK)
An interesting play beyond the typical lending and depositing game, BK earns most of its revenue from fee-based services. Specifically, its securities services arm accounts for the majority of revenue as it provides custody services for mutual funds, exchange-traded funds and securities lending. This isn’t a particularly glamorous or high-margin affair, as it often involves holding an asset short-term for a third party. But the company earns a fee on those custody transactions that collectively add up — providing a very solid foundation for the stock beyond the typical business of a mid-sized bank.
Dividend yield: 3.3%
New York Community Bancorp Inc. (NYCB)
A mid-sized financial firm valued around $6 billion, NYCB was caught up in the concerns about regional banks over the last few weeks in the wake of the SVB fallout. But NYCB has bounced back quickly, in part because it is a well-run outfit that has the confidence of both depositors and Wall Street investors alike. With a tremendous yield and a share price that has outperformed nearly all other regional banks year to date, this is a mid-sized financial stock worth considering.
Dividend yield: 7.7%
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7 Bank Stocks to Buy for the Dividends originally appeared on usnews.com
Update 04/07/23: This story was published at an earlier date and has been updated with new information.
