In this article, we discuss 14 best financial sector dividend stocks to invest in. You can skip our detailed analysis of the financial sector and its outlook for this year, and go directly to read 5 Best Financial Sector Dividend Stocks To Invest In.
2023 didn’t start out very rosy for the financial sector, marked by the sudden collapses of notable regional banks like Silicon Valley Bank, Signature Bank, and First Republic Bank. These downfalls were specifically concerning because of their widespread impacts, affecting various geographical regions. Bank shares remained under pressure throughout 2023, but they experienced a notable surge toward the end of October. This was fueled by growing confidence that the Federal Reserve would conclude its campaign of raising interest rates without causing a recession. Financials ended up finishing the year with positive returns, with the S&P 500 Financials delivering a 12.15% return to shareholders.
That said, since high-interest rates are still at play, the financial sector is not completely out of the dangers it suffered from in the spring of 2023. As CNBC reported, the Federal Reserve hasn’t started lowering its main interest rate, because of which banks still have massive amounts of unrealized losses from bonds and loans with low-interest rates on their financial records. This, along with possible losses from commercial real estate, puts large parts of the banking sector at risk. The report further mentioned that over 280 US banks, collectively holding nearly $900 billion in assets, face potential capital needs due to high levels of exposure to commercial real estate and losses related to interest rates.
Many financial analysts anticipate rate cuts in 2024 that could mainly influence the performance of bank stocks. Wells Fargo Chief Financial Officer Mike Santomassimo discussed the outlooked with Bloomberg and said:
“There are a number of factors that can impact our results, including the ultimate path of rates, the shape of the yield curve, quantitative tightening and fiscal deficits, consumer behavior and competitive behavior, to name just a few. All of which we have little to no control over.”
As a result of this, some of the biggest banks such as Wells Fargo & Company (NYSE:WFC), JPMorgan Chase & Co. (NYSE:JPM), and Citigroup Inc. (NYSE:C) have been crystal ball gazing and predicting declines in their net interest income(NII) for 2024. On the other hand, we saw how high-interest rates last year were beneficial for the biggest banks as they managed to amass $253 billion in NII, marking an increase of approximately $80 billion compared to the total in 2021. S&P Global also expects NII to decline in 2024, however, the firm also anticipates that banks will achieve a return on common equity ranging from 10% to 11% and will build their capital reserves by retaining earnings.
Financial companies are also known for paying dividends to shareholders. In fact, if we look at the recent data, we get to know that nearly half of the global increases in dividend payouts in 2023 originated from banks, exceeding their share in the total dividend payments, which is one-sixth, according to a report by Janus Henderson. The report also mentioned that the significant 15% rise, reaching a record $220 billion, primarily came from banks’ improved profitability due to the normalization of interest rates following years of loose monetary policies. In this article, we will take a look at some of the best dividend stocks from the financial sector.
14 Best Financial Sector Dividend Stocks To Invest In
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Our Methodology:
For this list, we scanned Insider Monkey’s database of 933 hedge funds as of Q4 2023 and identified dividend stocks from the finance sector. These companies offer a wide range of financial services, including banking, insurance, investment management, and financial planning. From the resultant list, we picked 14 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). That’s why we pay very close attention to this often-ignored indicator.
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BlackRock, Inc. (NYSE:BLK) is an American multinational investment management company that provides services to institutional and individual investors. In January this year, the company declared a 2% hike in its quarterly dividend to $5.10 per share. This marked the company's 14th consecutive year of dividend growth, which makes BLK one of the best dividend stocks on our list from the financial sector. The stock has a dividend yield of 2.67%, as of May 4.
At the end of Q4 2023, 48 hedge funds tracked by Insider Monkey reported having stakes in BlackRock, Inc. (NYSE:BLK), down from 54 in the previous quarter. The consolidated value of these stakes is nearly $3 billion. With over 2 million shares, Fisher Asset Management was the company's leading stakeholder in Q4.
KeyCorp (NYSE:KEY) is a retail banking company, based in Ohio. The company offers a wide range of banking and financial products and services to individual investors and businesses. Its quarterly dividend currently comes in at $0.205 per share and has a dividend yield of 5.58%, as of May 4. The company has never missed a dividend payment since 1985, which makes KEY one of the best dividend stocks on our list.
The number of hedge funds tracked by Insider Monkey owning stakes in KeyCorp (NYSE:KEY) jumped to 49 in Q4 2023, from 42 in the previous quarter. These stakes have a total value of nearly $1.2 billion.
Moody's Corporation (NYSE:MCO) is a New York-based financial services company that offers credit ratings and analytical solutions to investors and businesses. On February 15, the company declared a 10% hike in its quarterly dividend to $0.85 per share. Through this increase, the company stretched its dividend growth streak to 14 years, which places MCO on our list of the best dividend stocks from the financial sector. The stock's dividend yield on May 4 came in at 0.90%.
As of the close of Q4 2023, 56 hedge funds held stakes in Moody's Corporation (NYSE:MCO), compared with 58 in the previous quarter, as per Insider Monkey's database. The total value of these stakes is more than $19 billion. Warren Buffett's Berkshire Hathaway was the company's leading stakeholder in Q4.
American Express Company (NYSE:AXP) is next on our list of the best dividend stocks from the financial sector. The American multinational bank holding and financial services company announced a 17% hike in its quarterly dividend to $0.70 per share on March 6. This was the company's second dividend growth this year. The stock has a dividend yield of 1.19%, as of May 4.
American Express Company (NYSE:AXP) was a part of 64 hedge fund portfolios at the end of Q4 2023, down from 74 in the previous quarter, according to our database. The stakes held by these hedge funds have a total value of over $31.8 billion.
10. Fidelity National Information Services, Inc. (NYSE:FIS)
Number of Hedge Fund Holders: 66
Fidelity National Information Services, Inc. (NYSE:FIS) is a Florida-based finance company that offers a wide range of financial products and services. On April 25, the company declared a quarterly dividend of $0.36 per share, which was in line with its previous dividend. The stock has a dividend yield of 2.07%, as of May 4.
Fidelity National Information Services, Inc. (NYSE:FIS) reported a strong cash position in the fourth quarter of 2023. The company's operating cash flow for the quarter came in at $1.5 billion and its free cash flow amounted to $1.1 billion. It also distributed $305 million to shareholders through dividends during the quarter, which makes FIS one of the best dividend stocks on our list.
Fidelity National Information Services, Inc. (NYSE:FIS) was a popular buy among elite funds in Q4 2023 with hedge funds positions jumping to 66, from 55 in the previous quarter, as per Insider Monkey's database. The stakes held by these hedge funds have a collective value of over $3.2 billion. With over 4.3 million shares, Lyrical Asset Management was the company's leading stakeholder in Q4.
The Goldman Sachs Group, Inc. (NYSE:GS) is a global investment banking and investment management firm that provides related services to its consumers. On April 15, the company declared a quarterly dividend of $2.75 per share, which was consistent with its previous dividend. The stock has a dividend yield of 2.54%, as of May 4.
Insider Monkey's database of Q4 2023 indicated that 69 hedge funds held stakes in The Goldman Sachs Group, Inc. (NYSE:GS), up from 68 in the previous quarter. The total value of these stakes is over $6.33 billion.
Wells Fargo & Company (NYSE:WFC) is a California-based financial services company. The company has been paying regular dividends to shareholders since 1988 and currently offers a quarterly dividend of $0.35 per share. With a dividend yield of 2.33% as of May 4, WFC is one of the best dividend stocks on our list from the financial sector.
According to Insider Monkey's database of Q4 2023, 72 hedge funds held stakes in Wells Fargo & Company (NYSE:WFC), compared with 77 in the previous quarter. The consolidated value of these stakes is more than $5.5 billion. With over 23 million shares, Harris Associates was the company's leading stakeholder in Q4.
The Charles Schwab Corporation (NYSE:SCHW) is an American financial services company that offers banking, commercial banking, and investment management services to its consumers. The company currently pays a quarterly dividend of $0.25 per share and has a dividend yield of 1.34%, as of May 4.
The number of hedge funds tracked by Insider Monkey owning stakes in The Charles Schwab Corporation (NYSE:SCHW) grew to 81 in Q4 2023, from 77 in the previous quarter. These stakes are collectively valued at over $5 billion.
S&P Global Inc. (NYSE:SPGI) is an American capital market company that provides services in financial information and analytics. On April 30, the company declared a quarterly dividend of $0.91 per share, which was in line with its previous dividend. Overall, it has been growing its dividends for the past 51 years, which makes SPGI one of the best dividend stocks in the financial sector. The stock has a dividend yield of 0.86%, as of May 4.
The number of hedge funds tracked by Insider Monkey owning stakes in S&P Global Inc. (NYSE:SPGI) grew to 82 in Q4 2023, from 78 in the previous quarter. These stakes have a collective value of over $8.88 billion. Among these hedge funds, TCI Fund Management was the company's leading stakeholder in Q4.
