In this series of articles, I will be identifying which stocks for various S&P industries are best suitable for income investors, based on dividend growth and yield. For Part 3, I will be taking a look at Bank stocks. These stocks include:
- Bank of America (NYSE:BAC)
- The Bank of New York Mellon (NYSE:BK)
- BB&T Corp. (NYSE:BBT)
- Citigroup (NYSE:C)
- Comerica (NYSE:CMA)
- Fifth Third Bancorp (NASDAQ:FITB)
- Hudson City Bancorp (NASDAQ:HCBK)
- Huntington Bancshares (NASDAQ:HBAN)
- JPMorgan Chase (NYSE:JPM)
- KeyCorp (NYSE:KEY)
- M&T Bank (NYSE:MTB)
- People's United Financial (NASDAQ:PBCT)
- PNC Financial Services (NYSE:PNC)
- SunTrust Banks (NYSE:STI)
- U.S. Bancorp (NYSE:USB)
- Wells Fargo (NYSE:WFC)
- Zions Bancorp (NASDAQ:ZION)
When ranking the dividend-paying stocks by yield, the order is as follows:
- People's United Financial - 4.66%
- JPMorgan Chase - 2.92%
- Wells Fargo - 2.85%
- BB&T Corp. - 2.61%
- Fifth Third Bancorp - 2.38%
- M&T Bank - 2.34%
- PNC Financial Services - 2.32%
- U.S. Bancorp - 2.30%
- Huntington Bancshares - 2.21%
- SunTrust Banks - 2.15%
- Bank of New York Mellon - 2.02%
- Comerica - 1.69%
- Hudson City Bancorp - 1.64%
- KeyCorp - 1.64%
- Zions Bancorp - 0.57%
- Bank of America - 0.27%
- Citigroup - 0.08%
When ranking them by dividend growth over the past five years, the order is as follows:
- Fifth Third Bancorp - 1100%
- JPMorgan Chase - 700%
- Wells Fargo - 600%
- KeyCorp - 450%
- Huntington Bancshares - 400%
- PNC Financial Services - 380%
- U.S. Bancorp - 360%
- Comerica - 300%
- SunTrust Banks - 100%
- Bank of New York Mellon - 88.89%
- BB&T Corp. - 60%
- People's United Financial - 8.20%
- Bank of America - 0%
- Citigroup - 0%
- M&T Bank - 0%
- Zions Bancorp - 0%
- Hudson City Bancorp - (73.30%)
Based on yield and growth, several of these stocks can automatically be discounted as income investment opportunities.
Looking at the highest-ranked stocks of each list, I believe that People's United Financial's yield earns it a place at the top of the list in this sector. Nearly 1.75% higher than the next-highest yield, People's United Financial does have slower dividend growth over the past five years compared to others. However, it is one of the few that has been able to continuously raise its dividend over longer periods of time. Looking at the chart below, you can see how it compared to JPMorgan Chase, Wells Fargo, and Fifth Third Bank.
Looking at the company's financials, you can see in the chart below that People's United Financial has achieved considerable revenue and earnings growth over the past five years, even though it has seen some revenue stagnation recently.
The company's forward and trailing PE ratios are attractive, based on historical levels.
Another positive for People's United Financial is that its payout ratio has declined significantly over the past five years, which should help ensure continued future dividend growth.
While I currently like People's United Financial the best in terms of an income investment, I also believe that JPMorgan Chase and Wells Fargo are two additional stocks that income investors should consider. Both companies have dividend yields near 3%, and both have seen significant dividend growth over the past five years.
Both companies have low payout ratios (38% for JPMorgan Chase and 32% for Wells Fargo). Both companies have seen significant increases in earnings over the past five years.
And both companies are fairly priced, when looking at historical PE ratios.
I think income investors should take a good look at People's United Financial, as I think it will reward long-term shareholders nicely. In the company's most recent report, it displayed increases in both revenue and earnings, as well as improvements in its credit metrics.
The other two stocks in this sector I think income investors should also consider are JPMorgan Chase and Wells Fargo. These two stocks don't offer quite the yield that People's United Financial does, but they are both solid companies that should continue to provide decent yields and growth in future years.
As always, I suggest individual investors perform their own research before making any investment decisions.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.