In this article, we discuss 11 best regional bank dividend stocks to buy. You can skip our detailed analysis of the banking sector and its performance last year, and go directly to read 5 Best Regional Bank Dividend Stocks to Buy.
In 2023, the American banking sector faced a significant crisis that nearly led to a loss of trust among the public. During the spring of that year, several well-known regional banks, including Silicon Valley Bank, Signature Bank, and First Republic Bank, experienced sudden collapses. What made these downfalls particularly alarming was their widespread impact, as they occurred across different geographical areas. Furthermore, the reasons behind these failures were varied and complex, rather than stemming from a single cause. In the last quarter of 2023, profits within the US banking industry experienced a significant decline of nearly 45% compared to the previous year. This drop occurred despite a reduction in financial strain on consumers and a growing sense of optimism regarding the US economy's ability to steer clear of an immediate recession. The decline amounted to a decrease in profits to $38 billion, marking the most substantial year-on-year drop in quarterly profits since the second quarter of 2020, as reported by BankRegData, a data provider that consolidates quarterly reports submitted by lenders to the Federal Deposit Insurance Corporation.
Investors who believed U.S. regional banks had recovered from last year's troubles were surprised by New York Community Bancorp, Inc. (NYSE:NYCB)’s recent performance. The bank's earnings report led to a decline in regional bank shares, serving as a reminder to investors that the sector remains sensitive to changes in Federal Reserve interest rates, despite the passage of nearly a year since two banks failed. Investors mentioned that recent earnings of the bank highlighted the ongoing challenge faced by regional lenders due to high Federal Reserve rates. These rates are putting pressure on commercial real estate (CRE) portfolios and squeezing lending margins across the industry. The duration of that pressure will extend beyond initial expectations following the Federal Reserve's decision to maintain interest rates unchanged. This move led traders to adjust their projections for the first rate hike, pushing it from March to May, as indicated by futures data.
Confidence in regional banks continued to face obstacles due to weak underlying factors, such as revenue being constrained by increased funding expenses and subdued lending activity. However, there are indications that the sentiment might be changing, as inflation rates decrease and the possibility of interest rate cuts emerges. Banks like KeyCorp (NYSE:KEY) and Western Alliance Bancorporation (NYSE:WAL), which were previously affected by banking uncertainties, have shown significant recovery since hitting lows in October. In addition to this, the banking sector concluded last year with a robust performance in terms of stock market activity. Towards the end of 2023, bank stocks experienced a notable surge, with the KBW Nasdaq Bank Index climbing approximately 27% during the last three months. The index is down 3.41% since the start of 2024.
Despite banking stocks’ relatively stable performance this year, analysts' assessments of the sector's prospects, particularly for regional banks, vary significantly. According to a report by Deloitte, regulatory pressures will strongly impact regional and small banks, especially those heavily focused on specific investment and lending sectors, as well as particular types of deposits. Throughout 2024, many banks will prioritize efforts to enhance lending criteria and broaden the range of assets in their balance sheets, reducing reliance on risky investments like commercial real estate (CRE) loans and even safer options like long-term treasuries. For this reason, certain midsize and regional banks may also consider pursuing mergers as a strategy to attract external capital, thereby facilitating the divestment of low-yielding assets.
In view of these arguments, we will discuss some of the best regional bank dividend stocks in this article.
11 Best Regional Bank Dividend Stocks to Buy
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Our Methodology:
For this list, we scanned Insider Monkey's database of 900+ hedge funds as of Q3 2023 and identified regional bank stocks that pay dividends. These banks mainly operate in specific regions or local areas, rather than having a nationwide or global presence. From the resultant list, we picked 11 stocks with the highest number of hedge fund investors and ranked them in ascending order of hedge funds’ sentiment towards them. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).
Cullen/Frost Bankers, Inc. (NYSE:CFR) is a Texas-based financial holding company that offers a wide range of banking, investment, and insurance services to individuals, businesses, and other institutions. On January 25, the company declared a quarterly dividend of $0.92 per share, which was in line with its previous dividend. Overall, it has been growing its dividends for the past 30 consecutive years, which makes CFR one of the best dividend stocks in the regional banking sector. The stock has a dividend yield of 3.63%, as of February 7.
At the end of the third quarter of 2023, 18 hedge funds tracked by Insider Monkey reported having stakes in Cullen/Frost Bankers, Inc. (NYSE:CFR), up from 17 in the previous quarter. The consolidated value of these stakes is over $143 million. Among these hedge funds, Scopus Asset Management was the company's leading stakeholder in Q3.
Mairs & Power mentioned Cullen/Frost Bankers, Inc. (NYSE:CFR) in its Q4 2024 investor letter. Here is what the firm has to say:
“Looking at individual stocks, year-to-date relative underperformance was driven in part by several stocks including Texas-based Cullen/Frost Bankers, Inc. (NYSE:CFR), also contributed to underperformance during the period, driven by margin pressures due to rising deposit costs.”
Huntington Bancshares Incorporated (NASDAQ:HBAN) is an American regional bank holding company. It offers various banking products and services, including personal banking, commercial banking, wealth management, insurance, and other financial services. The company currently offers a quarterly dividend of $0.155 per share and has a dividend yield of 5.01%, as of February 7.
As of the close of Q3 2023, 27 hedge funds in Insider Monkey's database reported having stakes in Huntington Bancshares Incorporated (NASDAQ:HBAN), compared with 30 in the preceding quarter. The collective value of these stakes is more than $537.6 million. With roughly 30 million shares, Citadel Investment Group was the company's leading stakeholder in Q3.
U.S. Bancorp (NYSE:USB) is next on our list of the best dividend stocks from the regional banking sector. The diversified financial services holding company provides a wide range of financial services to individuals, businesses, governments, and institutions. In its recently-announced Q4 2024 earnings, the company reported revenue of $6.76 billion, which showed a 6.1% growth from the same period last year. It ended the quarter with over $61.1 million available in cash and due from the banks, compared with $53.5 million in the prior-year period.
U.S. Bancorp (NYSE:USB) offers a quarterly dividend of $0.49 per share, having raised it by 2% in December 2023. Through this increase, the company stretched its dividend growth streak to 13 years. The stock's dividend yield on February 7 came in at 4.89%.
U.S. Bancorp (NYSE:USB) was a part of 29 hedge fund portfolios at the end of Q3 2023, as per Insider Monkey's database. The stakes owned by these hedge funds have a collective value of nearly $413 million.
Madison Investments mentioned U.S. Bancorp (NYSE:USB) in its Q4 2024 investor letter. The firm made the following comment:
“U.S. Bancorp (NYSE:USB) stock performed well during the fourth quarter as interest rates moved lower and markets repriced its’ balance sheet risk. US Bank reported a third quarter that was slightly below expectations but reported continued growth in CET1 Capital (which refers to the Common Equity Tier 1 capital, representing the bank’s core equity capital). The bank also received news from the regulators that they will not be subject to the regulatory constraints of Category II compliance by the end of 2024, which gives them more flexibility.
M&T Bank Corporation (NYSE:MTB) is a New York-based regional bank holding company that offers a wide range of services in commercial banking, consumer banking, wealth management, and institutional banking. The company's quarterly dividend comes in at $1.30 per share and has a dividend yield of 3.93%, as of February 7. With a six-year streak of consistent dividend growth, MTB is one of the best dividend stocks in the regional banking industry.
Insider Monkey's database of Q3 2023 indicated that 32 hedge funds owned stakes in M&T Bank Corporation (NYSE:MTB), compared with 35 in the preceding quarter. The consolidated value of these stakes is nearly $400 million. Marshall Wace LLP was the largest stakeholder of the company in Q3.
An American financial services company, Citizens Financial Group, Inc. (NYSE:CFG) offers a broad range of retail and commercial banking products and services to individuals, small businesses, middle-market companies, large corporations, and institutions. On January 17, the company announced a quarterly dividend of $0.17 per share, which was consistent with its previous dividend. As of February 7, the stock has a dividend yield of 5.33%.
In the fourth quarter of 2023, Citizens Financial Group, Inc. (NYSE:CFG) posted revenue of nearly $2 billion, which fell by 9.5% from the same period last year. Though its revenue showed a decline, the company remained committed to its shareholder return. During the quarter, it returned $198 million to shareholders through dividends, which makes CFG one of the best dividend stocks in the regional banking sector.
As of the end of September 2023, 36 hedge funds in Insider Monkey's database owned stakes in Citizens Financial Group, Inc. (NYSE:CFG), compared with 46 in the previous quarter. The overall value of these stakes is roughly $482 million. With more than 3.7 million shares, AQR Capital Management was the company's leading stakeholder in Q4.
Fifth Third Bancorp (NASDAQ:FITB) ranks sixth on our list of the best dividend stocks from the regional banking sector. The diversified financial services company provides comprehensive banking solutions tailored to meet the needs of small businesses, middle-market companies, and large corporations. The company's quarterly dividend comes in at $0.35 per share and has a dividend yield of 4.18%, as of February 7. In 2023, the company achieved its 11th consecutive annual dividend increase.
According to Insider Monkey's database of Q3 2023, 38 hedge funds tracked by Insider Monkey held stakes in Fifth Third Bancorp (NASDAQ:FITB), down slightly from 39 in the previous quarter. These stakes are collectively valued at roughly $294 million.
