3 Bank Stocks for Yield-Seekers
We think the dividend payouts on these names are sustainable.
Eric Compton: With rates trending lower and lower, investors' search for yield is becoming even more difficult. One area of the stock market which has typically had decent dividend yields has been the banking sector. With a mature sector throwing off cash flows in excess of internal investment and capital needs, giving money back to shareholders makes sense. CCAR 2019 was recently completed, and with that we have a fairly complete picture of what dividends for the larger banks will look like over the next 12 months. Most of the banks with the highest dividend yields now have dividend payout ratios of around 40%, meaning dividend growth will be more tied to earnings growth going forward rather than increasing the payout ratio. That being said, for yield-seeking investors we would highlight Huntington, Wells Fargo, and KeyCorp.
Huntington boasts the highest dividend yield among the banks under our coverage, coming in at roughly 4.6%. The bank is a strong operator, focused in the Midwest, and the bank has improved its credit underwriting processes since the crisis. In our view management's reputation has also improved. With a payout ratio of roughly 40%, this high dividend yield seems sustainable to us.