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Investing Specialists

7 Bank Stocks With Dividends Set to Increase in 2011

Our top managers' bank holdings will benefit from dividend increases this year.

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By Jaime Peters, CFA, CPA | Senior Stock Analyst

As you may recall, the Ultimate Stock-Pickers Team put together an article earlier this year that highlighted some of the better yielding dividend stocks held by our top managers coming into 2011. With inflows into U.S. stock funds up during the first two months of the year, and equity markets struggling to continue the rally they started two years ago, we thought it would be interesting to take a deeper look at some companies held by our top managers--companies we believe are more likely to make meaningful increases to their dividends this year. In particular, we're looking more closely at the collection of bank stocks held by our Ultimate Stock-Pickers. These stocks had their dividends significantly cut during the financial crisis, but several are likely to raise their dividends this year.

For those who don't remember, the collapse of the credit and equity markets wreaked havoc on the banking sector, with aggregate holders of regional bank stocks like the  iShares Dow Jones U.S. Regional Banks (IAT) and  PowerShares Dynamic Banking (PJB) exchange-traded funds dropping as much as 50% in value from the end of September 2008 to the beginning of March 2009. During that same time period, shares of the big four banks-- Bank of America (BAC),  Citigroup (C),  J.P. Morgan Chase     (JPM), and  Wells Fargo     (WFC)--underperformed even more, with Bank of America and Citigroup both dropping more than 80% in value, Wells Fargo falling more than 60%, and J.P. Morgan dropping around 50%. Given the uncertainty created by the collapse of the equity and credit markets, many banks found themselves having to significantly cut (or, in some cases, eliminate) their dividends in order to preserve capital. This was further compounded by the infusion of TARP capital into the banks, which restricted the ability of these firms to increase their dividends for an extended period of time.

The Morningstar Ultimate Stock-Pickers Team does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.