U.S. banks have come a long way in the five years since the
recession they largely created, and are more flush with cash
today than any time since then.
Bank profits hit an all-time high in 2013, amassing a combined
$155 billion in
. That was up 10% from 2012, and $7 billion more than the
previous record tally of $148 billion in 2006.
Not all banks are thriving. The FDIC still has 467 U.S. banks
on its "problem list." But that's little more than half that 888
banks that made the list in 2011 - just three years ago. Clearly,
America's banks are making significant strides.
There is a bit of an asterisk to this bank recovery, however.
Much of the profit improvement is due to some banks simply
keeping less money in reserve for future lending losses. In fact,
according to the FDIC, 20% of bank profits in the fourth quarter
were due to that savvy accounting maneuver.
Clever accounting sleight of hand aside, it doesn't change the
fact that some U.S. banks are using their improved cash flow to
5 Bank Stocks Whose Dividends Really Stand Out
Wells Fargo (
) and JPMorgan Chase (
Picking two of the six largest banks in America may seem like
an obvious choice. But both institutions have earned it with
steady dividend growth since 2009.
Wells Fargo - a stock that we bought in our premium
in March 2012 - has been the most profitable of the big banks the
last three years. The company's dividend growth has followed
suit. Since March 2011, Wells Fargo's dividend payout has
increased from 5 cents a share to 30 cents a share. Its current
yield is 2.5%.
JPMorgan's yield and dividend growth are comparable. Despite
the disastrous "
" incident in 2012 - in which a rogue London-based trader cost
the company more than $62 billion in investment losses -
JPMorgan's dividend payments never slowed, increasing from 5
cents a share in 2011 to 38 cents per share now. Meanwhile, JPM's
yield has risen to 2.6%.
Those yields aren't spectacular. But the dividend growth has
been. And if you want reliable in your bank investments, it makes
sense to invest in the two largest banks in America.
People's United Bank (Nasdaq: PBCT)
New England's largest regional bank is also one of its highest
yielding. People's offers a healthy 4.5% yield on a $0.1625
quarterly dividend that has been growing since 2005. People's
United is one of the few U.S. banks that managed to weather the
recession relatively unscathed. Earnings per share never turned
negative in 2008-09, while most other banks were requiring
bailouts. Now, People's is flourishing, with EPS more than
tripling since 2010.
PBCT's share price has lagged a bit, with the stock up just
16% in the last two years. But its consistently high yield has
made People's real return much more appealing to income
Umpqua Holdings (Nasdaq: UMPQ)
Umpqua has a funny name. But its dividend growth is
A small regional bank ($2.1 billion market cap) with roots in
the Pacific Northwest, Umpqua has tripled its payout in less than
three years. The 15-cent dividend amounts to a solid 3.2%
Umpqua didn't avoid a recession-era dip the way People's
United did. The company reported EPS of minus-$2.36 in 2009. But
Umpqua has bounced back nicely, posting EPS of plus-87 cents last
Now that Umpqua's finances are back on solid footing, its
dividend growth has accelerated.
United Bankshares (Nasdaq: UBSI)
are more reliable dividend growers than United Bankshares.
Like a slow drip from a faucet, United has upped its dividend
by a single penny per share every year but one (2008) since 1998.
That type of slow growth isn't sexy. But it's effective.
What was an 18-cent dividend in 1998 is now a 32-cent
dividend. Meanwhile, United's yield has risen to 4.2%.
Like People's, United Bankshares' stock price hasn't budged
much in recent years. Still, there are reasons to like a bank
that has increased its dividend in 14 of the last 15 years.
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