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What are we looking for?

Sustainable dividends from U.S. banks and other financial services players prepared to weather short-term market tremors.

The screen

Shares of major U.S. banks – and shares of many non-bank financial firms – have dropped on fears that more regional banks will collapse after the implosion of both Silicon Valley Bank and Signature Bank. Still, we think the top stocks in both segments will weather any fallout from today’s higher interest rates and the nervousness of U.S. depositors and investors.

For U.S. top banks, the federal government’s assurance that even uninsured depositors will get all their money back will likely steady the sector. In the meantime, lingering doubts could boost deposits for those bigger, more closely regulated banks. Those giants are also better placed to meet any new capital requirements or restrictions that may emerge.

At the same time, share price declines for non-bank financial services leaders – and their now-higher dividend yields – present a buying opportunity for dividend seekers.

From a list of well-provisioned and profitable U.S. banks and non-bank financial companies, we zeroed in on those offering dividends. We then applied our TSI Dividend Sustainability Rating System. It awards points to a stock based on eight factors:

  • One point for five years of continuous dividend payments – two points for more than five.
  • Two points if it has raised the payment in the past five years.
  • One point for management’s commitment to dividends.
  • One point for operating in non-cyclical industries.
  • One point for limited exposure to foreign currency rates and freedom from political interference.
  • Two points for a strong balance sheet, including manageable debt and adequate cash.
  • Two points for a long-term record of positive earnings and cash flow to cover dividends.
  • One point if the company is an industry leader.

Companies with 10 to 12 points have the most secure dividends, or the highest sustainability. Those with seven to nine points have above-average sustainability; average sustainability, four to six points; and below average sustainability, one to three points.

What we found

Seven U.S banks with sustainable dividends

Ranking*CompanyTickerDiv. Sustain. RatingPointsDiv. Yld. (%)Mkt. Cap. (US$ Bil.)1Y Ttl. Rtn. (%) Recent Price (US$)
1JP Morgan Chase & Co.JPM-NAbove Average93.1396.2-3.2128.26
2Bank of America Corp.BAC-NAbove Average93.1230.2-31.428.49
3T. Rowe Price Group Inc.TROW-QAbove Average84.623.9-23.6106.66
4Citigroup Inc.C-NAbove Average84.692.1-18.744.82
5State Street Corp.STT-NAbove Average83.426.4-12.273.70
6Wells Fargo & Co.WFC-NAbove Average83.1152.4-22.538.85
7Broadridge Financial Solutions Inc.BR-NAbove Average82.116.1-6.9136.15

Source: Dividend Advisor. 

*Ranking is determined by TSI Dividend Sustainability Score. Where overall points are the same, analysts considered P/E, dividend yield and industry outlook to decide final placements.

Our TSI Dividend Sustainability Rating System generated seven top stocks. New York-based J.P. Morgan Chase & Co. JPM-N is the largest banking firm in the United States, with total assets of about US$3.2-trillion. Bank of America Corp. BAC-N, headquartered in Charlotte, N.C., is the second-largest, and New York-based Citigroup C-N is the third. Close behind is San Francisco’s Wells Fargo & Co. WFC-N in fourth spot. Lake Success, N.Y.-headquartered Broadridge Financial Solutions Inc. BR-N serves the investment industry in three main areas: investor communications, securities processing, and transaction clearing. Baltimore’s T. Rowe Price Group Inc. TROW-Q sells mutual funds and wealth management services. And finally, Boston-based State Street Corp. STT-N sells accounting and administrative services to operators of mutual funds and pension plans.

More about TSI Network

TSI Network is the online home of The Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor, and the TSI Dividend Advisor. TSI Network is also affiliated with Successful Investor Wealth Management.

Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 12/06/24 0:22pm EDT.

SymbolName% changeLast
JPM-N
JP Morgan Chase & Company
-0.76%192.88
C-N
Citigroup Inc
+2.32%60.51
WFC-N
Wells Fargo & Company
+0.95%57.67
BR-N
Broadridge Financial Solutions Llc
+0.75%198.14
STT-N
State Street Corp
+2.09%72.62
BAC-N
Bank of America Corp
+2.11%39.68
TROW-Q
T Rowe Price Group
+4.47%119.61

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