In this article, we discuss 13 best financial dividend stocks to invest in. You can skip our detailed analysis of the financial sector and its performance in the past, and go directly to read 5 Best Financial Dividend Stocks To Invest In.
Over the years, the finance industry in the US has gone through several changes. The onset of the pandemic and the recent banking crisis have made these changes even more intense. Following the failure of three major US banks in March this year, worried customers and investors rushed to withdraw their funds. CNN reported that these banks had about $559 billion in total assets, surpassing the $523 billion held by 25 banks that collapsed in 2008 when accounting for inflation.
The effects of the pandemic have resulted in financial companies from Wall Street shifting away from New York City and moving to the Sun Belt region. According to Bloomberg, the firms are taking almost $1 trillion worth of managed assets with them. This move is being driven by factors like taxes and the impact of the COVID-19 pandemic, but also by practical and cultural reasons. Amid the pandemic, factors like no state income tax, pleasant weather, and business-friendly offers encouraged New York-based hedge fund billionaires to move their businesses to Florida. The report also mentioned that between the beginning of 2020 and the end of March 2023, over 370 investment companies, which is about 2.5% of all US investment firms, shifted their main offices to a different state. These companies collectively managed assets worth $2.7 trillion.
In one of the recent developments, shares of several US banks dropped on August 22. This happened after S&P Global, a rating agency, lowered credit ratings for certain regional banks that are heavily involved in commercial real estate. These banks include KeyCorp (NYSE:KEY), Comerica Incorporated (NYSE:CMA), and Associated Banc-Corp (NYSE:ASB). This action came after a similar move by Moody's. Both of these rating agencies are making these changes because of an ongoing banking crisis that started in March.
S&P Global mentioned challenging conditions affecting the banking sector. Here is what the credit agency said in its report:
"The sharp rise in interest rates and quantitative tightening deployed since March 2022 to combat high inflation are weighing on many U.S. banks' funding, liquidity and spread income. These factors have also caused the value of banks' assets to fall and raised the odds of asset quality deterioration."
Investing in financial stocks means putting money into the top businesses that offer banking, insurance, credit cards, and various other financial services around the world. Since the financial sector is central to the worldwide economy, it's a smart idea for investors to seriously think about including financial stocks as a significant part of their investment collections. Due to the ongoing issues in the finance industry, the sector is struggling to match the pace of the market. The S&P 500 Financials, which tracks the performance of some of the most prominent finance companies such as Visa Inc. (NYSE:V), Mastercard Incorporated (NYSE:MA), and JPMorgan Chase & Co. (NYSE:JPM), is down by 1.11% year-to-date. On the other hand, the S&P 500 gained 14.44% this year so far.
Investing in dividend stocks within the finance sector can be a prudent strategy for income investors. However, it's essential to note that the finance sector can be sensitive to economic fluctuations and regulatory changes. For example, during economic downturns, financial institutions might face challenges that affect their ability to maintain dividend payouts. Additionally, changes in interest rates, lending practices, or government policies can impact the sector's performance. In this article, we have mentioned some of the best dividend stocks from the finance sector.
13 Best Financial Dividend Stocks To Invest In
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Our Methodology:
For this list, we scanned Insider Monkey’s database of 910 hedge funds as of Q2 2023 and identified dividend stocks from the finance sector. From the resultant list, we picked 13 stocks with the highest number of hedge fund investors and ranked them in ascending order of hedge funds’ sentiment towards them.
BlackRock, Inc. (NYSE:BLK) is an American multinational investment management corporation that provides a wide range of financial services, primarily focused on asset management. The company is one of the best dividend stocks on our list as it has raised its dividends every year since 2010. It currently pays a quarterly dividend of $5.00 per share and has a dividend yield of 2.97%, as of August 23.
In addition to BlackRock, Inc. (NYSE:BLK), Visa Inc. (NYSE:V), Mastercard Incorporated (NYSE:MA), and JPMorgan Chase & Co. (NYSE:JPM) are other dividend stocks from the finance sector to invest in.
At the end of Q2 2023, 57 hedge funds in Insider Monkey's database reported having stakes in BlackRock, Inc. (NYSE:BLK), compared with 58 in the previous quarter. The consolidated value of these stakes is over $1.66 billion.
Baron Funds mentioned BlackRock, Inc. (NYSE:BLK) in its Q2 2023 investor letter. Here is what the firm has to say:
“Additionally, elevated yields and the prospect of the Fed nearing the end of its rate hiking cycle makes fixed income an attractive asset class for investors, which should also benefit traditional asset managers with fixed income exposure such as BlackRock, Inc. (NYSE:BLK).”
Moody's Corporation (NYSE:MCO) is a New York-based multinational financial services company that specializes in credit ratings, research, risk analysis, and data analytics. In the second quarter of 2023, the company generated nearly $1.5 billion in revenues, which showed an 8% growth from the same period last year. For the six months ended June 30, its operating cash flow came in at over $1.2 billion, up from $761 million in the prior-year period. Moreover, its free cash flow for the period jumped to $1.08 billion, from $628 million in Q2 2022.
Moody's Corporation (NYSE:MCO), one of the best dividend stocks on our list, has been growing its dividends consistently for 13 years. It currently pays a quarterly dividend of $0.77 per share and offers a dividend yield of 0.93%, as of August 23.
Moody's Corporation (NYSE:MCO) saw growth in hedge fund positions at the end of Q2 2023 at 60, from 51 in the previous quarter, as per Insider Monkey's database. The collective value of stakes owned by these hedge funds is over $1.7 billion.
Akre Capital Management mentioned Moody's Corporation (NYSE:MCO) in its Q2 2023 investor letter. Here is what the firm has to say:
“The Fund owns many businesses that stand to benefit enormously from A.I. Moody’s Corporation (NYSE:MCO) recently announced a new strategic partnership with Microsoft to leverage A.I. into its global risk assessment products and their development. The top five positive contributors to performance during the quarter were Moody’s, Mastercard, CoStar, Constellation Software, and Adobe.”
11. Fidelity National Information Services, Inc. (NYSE:FIS)
Number of Hedge Fund Holders: 67
Fidelity National Information Services, Inc. (NYSE:FIS) is next on our list of the best dividend stocks from the finance sector. The global financial tech company offers a quarterly dividend of $0.52 per share, having raised it by 10.6% in February this year. After the pandemic, the company paused increasing dividends in 2020 but then raised them for two consecutive years. The stock's dividend yield on August 23 came in at 3.76%.
As of the close of Q2 2023, 67 hedge funds tracked by Insider Monkey reported having stakes in Fidelity National Information Services, Inc. (NYSE:FIS), worth collectively over $2.45 billion. With over 5 million shares, Citadel Investment Group was the company's leading stakeholder in Q2.
The Goldman Sachs Group, Inc. (NYSE:GS) is an American multinational investment banking company. Though its revenue of $10.89 billion in the second quarter of 2023 fell by 8.2% from the same period last year, it still beat analysts' estimates by $160 million. During the quarter, it returned $864 million to shareholders in dividends, which makes it one of the best dividend stocks in the finance sector.
The Goldman Sachs Group, Inc. (NYSE:GS) currently pays a quarterly dividend of $2.75 per share and has a dividend yield of 3.44%, as of August 23.
At the end of June 2023, 70 hedge funds in Insider Monkey's database reported owning stakes in The Goldman Sachs Group, Inc. (NYSE:GS), up from 69 a quarter earlier. The overall value of these stakes is over $3.1 billion.
American Express Company (NYSE:AXP) is an American financial services company that provides a range of services primarily focused on payment and credit card products. The company currently pays a quarterly dividend of $0.60 per share for a dividend yield of 1.52%, as of August 23. It has been making regular dividend payments to shareholders since 1989, which makes it one of the best dividend stocks on our list.
At the end of Q2 2023, Warren Buffett's Berkshire Hathaway was the leading stakeholder of American Express Company (NYSE:AXP) in Q2 2023, owning a stake worth over $26.4 billion. Overall, 73 hedge funds tracked by Insider Monkey owned investments in the company, with a collective value of over $28 billion.
Wells Fargo & Company (NYSE:WFC) is a multinational financial services company, based in California. In the second quarter of 2023, the company reported revenue of $20.5 billion, which saw a 20.6% growth from the same period last year. Its net income for the quarter amounted to $4.9 billion.
Wells Fargo & Company (NYSE:WFC)successfully cleared the Federal Reserve's stress test. As a result, they revealed a 16.7% increase in their quarterly dividend on July 25th, bringing it to $0.30 per share. This marks their third year in a row of raising dividends, which makes it one of the best dividend stocks on our list.
At the end of Q2 2023, 75 hedge funds in Insider Monkey's database reported having stakes in Wells Fargo & Company (NYSE:WFC), worth over $4.06 billion. Among these hedge funds, Harris Associates was the company's leading stakeholder in Q2.
Citigroup Inc. (NYSE:C) is next on our list of the best dividend stocks from the finance sector. The company has been paying regular dividends to shareholders since 2011. It currently pays a quarterly dividend of $0.53 per share, having raised it by 3.98% on July 20. As of August 23, the stock has a dividend yield of 5.16%.
According to Insider Monkey's database of 910 hedge funds as of Q2 2023, 75 elite funds owned investments in Citigroup Inc. (NYSE:C), down from 79 in the previous quarter. The stakes owned by these funds have a total value of over $6.7 billion. Warren Buffett, Richard S. Pzena, and Edgar Wachenheim were the company's leading stakeholders in Q2.
An American private banking company, S&P Global Inc. (NYSE:SPGI) has been growing its dividends consistently for the past 50 years. The company offers a quarterly dividend of $0.90 per share and has a dividend yield of 0.93%, as of August 23. Other best dividend stocks from the finance sector include Visa Inc. (NYSE:V), Mastercard Incorporated (NYSE:MA), and JPMorgan Chase & Co. (NYSE:JPM).
Insider Monkey's database showed that 82 funds owned stakes in S&P Global Inc. (NYSE:SPGI) at the end of Q2 2023, worth roughly $8.3 billion in total.
