3 Bank Stocks That Are Passive Income All-Stars

With stock prices down this year, there are some really high-yielding dividends out there, which is why investors may find stocks that pay passive income a good option over growth stocks right now. That way you can collect predictable, consistent income until the market bounces back, at which time most stocks should see a boost.

Bank stocks are well known for paying out good dividends. Here are three that are passive income all-stars.

1. Morgan Stanley

Investment banking and wealth management company Morgan Stanley (NYSE: MS) recently announced that it plans to increase its quarterly dividend in the third quarter to $0.775 a share, representing an 11% bump from last quarter. That's also happening as the bank authorized a new $20 billion share repurchase program to be carried out over the next few years.

With the new dividend, Morgan Stanley will have an annual dividend yield of roughly 4.1%, with shares trading around $77 as of this writing. With analysts on average projecting earnings to come in at $147.95 for 2022, that only represents about a 21% dividend payout ratio as well, leaving plenty of room for growth.

2. Citizens Financial Group

Citizens Financial Group (NYSE: CFG) is a roughly $192 billion asset bank headquartered in Rhode Island. With shares trading down more than 27% this year, Citizens stock price is roughly $36 and has a current annual dividend yield of 4.37%. Management said in a recent news release that the bank's board of directors will consider a dividend increase in the current quarter.

While the bank's payout ratio is toward the higher end of where banks tend to fall, currently nearing 37%, that's actually what management has been targeting. Furthermore, Citizens has a lot of capital. Its common equity tier 1 (CET1) capital ratio, which measures a bank's core capital expressed as a percentage of its risk-weighted assets such as loans, ended the first quarter at 9.7%. Its regulatory requirement will likely end up around 7.9% again in 2023, leaving plenty of breathing room to continue to pay and grow the dividend if it so chooses.

3. New York Community Bancorp

The $61 billion multifamily lender New York Community Bancorp (NYSE: NYCB) hasn't raised its dividend in many years, but it has still consistently paid a huge dividend yield. With shares down to around $9 this year, the bank's dividend yield is a whopping 7.3%. You'll be hard-pressed to find too many banks, if any, paying a higher yield than that.

While the stock has not done well for many years now, management is actively working to transform its business model with new lending verticals and by building a much stronger deposit base. A big part of this transformation will be the bank's previously announced acquisition of Flagstar Bancorp based in Michigan. This merger has now been delayed, but management still expects to eventually complete it and reap similar financial benefits that it initially promised. CEO Thomas Cangemi also said he expects the bank to maintain the current dividend once the acquisition is complete.

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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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