5 S&P 500 Bank Stocks With Dividend Yield of 4% or More

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Amid serious macroeconomic headwinds, the banking industry seems to have regained some momentum after a disastrous start to 2022. The Federal Reserve has already raised the interest rates by 375 basis points so far this year and more hikes are expected to control the red-hot inflation. Banks are well poised to capitalize on this.

The recently concluded earnings season for banks also indicated support from higher interest rates and improving loan demand. This resulted in a solid increase in net interest income (NII) and an expansion in net interest margin (NIM). Also, banks guided for further improvement in NII for the year and into 2023 driven by favorable rates and lending scenario. Amid such favorable developments, bank stocks continue to be in the spotlight.

Nonetheless, investors must be cautious while choosing bank stocks for generating solid returns. The operating environment is gradually turning grim with recessionary fears taking hold, and banks will not be untouched by the economic headwinds. So, we picked five banks – Citigroup C, Truist Financial TFC, U.S. Bancorp USB, Huntington Bancshares HBAN and Citizens Financial Group CFG – that are part of the S&P 500 Index and have been regularly paying dividends.

To select these banks, we ran the Zacks Stocks Screener to find stocks with a dividend yield in excess of 4% and a five-year historical dividend growth of more than 6%. Also, these five stocks currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Let’s now discuss the above-mentioned five bank stocks in detail:

Headquartered in New York, Citigroup is a globally diversified financial services holding company providing a range of financial products and services. The company, which is among the top four U.S. banks, has around 200 million customer accounts across 160 countries and jurisdictions.

A diverse business model, focus on core operations and streamlining of international consumer businesses will continue to drive the company’s growth. C continues to optimize its branch network, with a focus on core urban markets and improving digital channels. It is also making efforts to simplify operations and reduce costs. All these initiatives will likely help augment its profitability and efficiency over the long term.

The stock has a dividend yield of 4.16% and a five-year annualized dividend growth of 9.04%. Further, C’s payout ratio is 26% of earnings at present. Check Citigroup’s dividend history here.

Citigroup Inc. Dividend Yield (TTM)

Citigroup Inc. Dividend Yield (TTM)

Citigroup Inc. dividend-yield-ttm | Citigroup Inc. Quote

Truist Financial, formed following the ‘merger of equals’ deal between BB&T Corp and SunTrust Banks, is the sixth largest commercial bank in the United States. Headquartered in Charlotte, NC, the company offers a variety of services to consumers and commercial clients through 2,119 banking offices and 3,185 automated telling machines (ATMs).

Steady loan growth, higher interest rates and Truist Financial’s efforts to improve fee income will likely keep aiding financials. The company has been undertaking strategic acquisitions to further its support fee income growth. Over the past couple of years, it acquired BankDirect Capital Finance, BenefitMall, Kensington Vanguard National Land Services and Constellation Affiliated Partners to bolster the insurance business. Given its ample liquidity, TFC is less likely to default on interest and debt repayments, even if the economic situation worsens.

The company has a dividend yield of 4.49% and a five-year annualized dividend growth of 7.64%. Currently, TFC’s payout ratio is 41% of earnings. Check Truist Financial’s dividend history here.

Truist Financial Corporation Dividend Yield (TTM)

Truist Financial Corporation Dividend Yield (TTM)

Truist Financial Corporation dividend-yield-ttm | Truist Financial Corporation Quote

U.S. Bancorp, headquartered in Minneapolis, MN, provides banking and investment services principally operating in the Midwest and West regions of the United States. A solid business model and diverse revenue streams are likely to aid its financials.

USB’s strong loan and deposit balances are major positives in the rising interest rate environment. While the closing of the MUFG Union Bank buyout was delayed due to pending regulatory approvals, the deal is now expected to conclude on Dec 1. Upon closure, the transaction is expected to be accretive the company’s earnings. Further, U.S. Bancorp is undertaking a number of strategic buyouts, which have strengthened its fee income sources. These have also enhanced U.S. Bancorp’s range of products, services and capabilities as well as improved market share.

The company has a dividend yield of 4.39% and a five-year annualized dividend growth of 9.4%. Also, USB’s payout ratio is 44% of earnings at present. Check U.S. Bancorp’s dividend history here.

U.S. Bancorp Dividend Yield (TTM)

U.S. Bancorp Dividend Yield (TTM)

U.S. Bancorp dividend-yield-ttm | U.S. Bancorp Quote

Huntington Bancshares is a Columbus, OH-based multi-state diversified regional bank holding company. HBAN operates through four business segments – Consumer and Business Banking, Commercial Banking, Vehicle Finance and Regional Banking and The Huntington Private Client Group.

Decent economic growth and a strong lending pipeline are expected to drive loan growth, thereby aiding the company’s NII. Over the past few years, Huntington Bancshares has expanded its footprint and capabilities in a number of verticals through acquisitions. Such inorganic expansion efforts help the company to gain significant market share and, thereby, enhance its profitability over the long run. Further, the company’s credit quality continues to normalize, supported by a favorable economic outlook.

This bank has a dividend yield of 4.11% and a five-year annualized dividend growth of 6.42%. At present, HBAN’s payout ratio is 43% of earnings. Check Huntington Bancshares’ dividend history here.

Huntington Bancshares Incorporated Dividend Yield (TTM)

Huntington Bancshares Incorporated Dividend Yield (TTM)

Huntington Bancshares Incorporated dividend-yield-ttm | Huntington Bancshares Incorporated Quote

Based in Providence, RI, Citizens Financial is one of the largest retail banks holding companies in the United States. CFG operates roughly 1200 branches and around 3,300 ATMs in 14 states and the District of Columbia.

Robust loans and deposit balances, and higher interest rates will keep aiding NII and NIM. Citizens Financial’s focus on executing a series of revenue and efficiency initiatives led to the introduction of “Tapping Our Potential” (TOP) program in late 2014. It remains on track to realize substantial benefits through the TOP 7 Program this year. The bank is well poised to grow via acquisitions, reflected in its accomplishment of several major buyouts in the last several years. These efforts enable the company to expand its product capabilities and geographic reach.

The company has a dividend yield of 4.15% and a five-year annualized dividend growth of 15.2%. Further, CFG’s payout ratio is 35% of earnings at present. Check Citizens Financial’s dividend history here.

Citizens Financial Group, Inc. Dividend Yield (TTM)

Citizens Financial Group, Inc. Dividend Yield (TTM)

Citizens Financial Group, Inc. dividend-yield-ttm | Citizens Financial Group, Inc. Quote

Conclusion

As the macroeconomic factors are turning dismal, investors like dividends for a number of reasons. These greatly improve stock investing profits, lower overall portfolio risk and carry tax advantages, among others. But investors must be careful as choosing stocks just based on higher yields is not a good idea. They must also take into account company fundamentals to find compelling investment opportunities.

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Citigroup Inc. (C) : Free Stock Analysis Report
 
U.S. Bancorp (USB) : Free Stock Analysis Report
 
Huntington Bancshares Incorporated (HBAN) : Free Stock Analysis Report
 
Citizens Financial Group, Inc. (CFG) : Free Stock Analysis Report
 
Truist Financial Corporation (TFC) : Free Stock Analysis Report
 
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