The financial sector is a strong source of dividend stocks. Many banks have maintained long histories of paying dividends to shareholders, and raising their dividends on an annual basis.
In addition, many bank stocks have strong dividend yields above 3%.
The following 3 bank stocks are attractive for income investors due to their market-beating yields and dividend growth potential.
PNC Financial (PNC)
PNC Financial Services is one of the largest diversified financial services companies in the U.S. It is engaged in retail banking as well as corporate and institutional banking and asset management. Its retail network is located primarily in markets across the Mid-Atlantic, Midwest and Southeast.
In mid-October, PNC reported (10/15/24) financial results for the third quarter of fiscal 2024. Net interest income edged up 3% sequentially, as net interest margin expanded from 2.60% to 2.64%. Fee income grew 10%, mostly thanks to strong capital markets. As a result, earnings-per-share grew 3% sequentially, from $3.39 to $3.49, and exceeded the analysts’ consensus by $0.17. PNC has exceeded the analysts’ earnings-per-share estimates in 14 of the last 17 quarters.
Inflation has finally cooled and thus the Fed has just begun reducing interest rates. This development is positive, as it is likely to mitigate the cost of deposits. The bank improved its net interest margin for a second consecutive quarter and expects record net interest income in 2025.
PNC has raised its dividend for 14 consecutive years. Thanks to a healthy payout ratio of 49%, the dividend should be considered safe. Shares currently yield 3.1%.
U.S. Bancorp (USB)
U.S. Bancorp traces its lineage back to 1863 when the First National Bank of Cincinnati opened for business. It has since grown to 70,000 employees, a $78 billion market capitalization, and about $28 billion in annual revenue. The bank has expanded from a regional player to a national powerhouse in recent years, becoming the fifth-largest bank by assets in the U.S. It competes mostly in traditional banking activities, but also offers wealth management, payment, and investment services.
U.S. Bancorp posted third quarter earnings on October 16th, 2024, and results were mixed. The bank beat expectations for earnings-per-share at $1.03, which was four cents ahead of estimates. Earnings-per-share was up from 98 cents in Q2, but lower from $1.05 in the year-ago period. However, revenue was off 2.4% year-over-year to $6.86 billion, missing expectations by $50 million.
The company guided for flat net interest income in the final quarter of the year, which is the primary source of revenue. Net interest income and margin were higher in Q3 when compared to Q2, which management noted was from loan mix, repricing of fixed rate earning assets, and managing its liabilities. Credit quality metrics were strong once again, as investors are accustomed to from U.S. Bancorp.
Provisions for credit losses were $557 million, which was down slightly from $568 million in Q2, but higher from $515 million a year ago. Net charge-off ratio was 0.6%, up from 0.44% a year ago.
USB has increased its dividend for 14 consecutive years, and currently yields 4.0%.
Community Trust Bancorp (CTBI)
Community Trust Bancorp is a regional bank with 84 branch locations in 35 counties in Kentucky, Tennessee and West Virginia. It is the second-largest bank holding company in Kentucky and has a market cap of $946 million. Community Trust Bancorp operates with a $5.2 billion balance sheet.
In mid-October, Community Trust Bancorp reported (10/16/24) financial results for the third quarter of fiscal 2024. Its net interest income grew 9% over the prior year’s quarter, as net interest margin improved from 3.27% to 3.39% and loans grew 9%. Provisions for loan losses increased from $1.8 million to $2.7 million. Non-interest income edged up 0.4% thanks to increased deposit fees.
Overall, earnings-per-share grew 7%, from $1.15 to $1.23, and exceeded the analyst’s consensus by $0.08. Community Trust Bancorp is a conservatively managed bank, which has proved resilient to all kinds of downturns. The bank has grown its deposits 4% in the last 12 months. It has also proved resilient to the downturn caused by the impact of nearly 23-year high interest rates on the net interest margin of most banks via high deposit costs.
Thanks to its solid business performance, Community Trust Bancorp has rallied 49% in the last twelve months. Given the resilient performance of the bank in the current environment, we have raised our forecast for earnings-per-share in 2024 from $4.20 to $4.45.
Community Trust Bancorp has grown its earnings-per-share at a 6.4% average annual rate over the last decade and at a 5.4% average annual rate over the last five years. Inflation has finally cooled and the Fed just began reducing interest rates from 23-year high levels. Lower interest rates are likely to enhance the net interest margin of the bank via lower deposit costs.
CTBI has raised its dividend for 44 consecutive years. CTBI shares currently yield 4.6%.
Disclosure: No positions in any stocks mentioned
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Bob Ciura has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Bob received a Bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.