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10 Bank Dividend Stocks to Diversify Your Portfolio

·8 min read

In this article we will be taking a look at 10 bank dividend stocks to diversify your portfolio. To skip our detailed analysis on bank dividend stocks, you can go directly to see the 5 Bank Dividend Stocks to Diversify Your Portfolio.

S&P Global Market Intelligence has reported that Barclays analysts this January, in a sector-outlook report on banking and financial services stocks, noted that bank stocks are expected to outperform the market this year. In the foreseeable future, analysts can see positive trends in the banking sector including loan growth and low deposit betas.

As such, financial services sector companies like Morgan Stanley (NYSE:MS) and Citigroup Inc. (NYSE:C) are seeing a rise in investor support, rather than a decline. This is unsurprising, as in the first five trading days of January, the S&P 500 financials sector rose by 5.4%, according to the Wall Street Journal. This feat represented the sector's best start to the year since 2010, and also represented an outperformance when compared to the broader S&P 500 index, which suffered a pullback of 1.9%. Reuters has also reported that bank stocks rose ahead of a key inflation reading at the beginning of the month due to a rise in Treasury yields.

Bank of America Corporation (NYSE:BAC) was among the stocks that saw a gain of over 1% at the beginning of February, showcasing the optimistic performance of the sector as a whole. Wells Fargo & Company (NYSE:WFC) and JPMorgan Chase & Co. (NYSE:JPM) were also among the gainers in February, gaining over 1% each. Additionally, in comparison to other sectors, the banking and financial services sector seems to be sailing smoothly. For instance, the S&P 500 energy sector index sank 2.1% as of this February, while the S&P 500 banking index still rallied 1.9% this month. The outlook for the sector thus seems to be positive so far, to the interest of investors looking to take up more financial services stocks for portfolio diversification.

10 Bank Dividend Stocks to Diversify Your Portfolio
10 Bank Dividend Stocks to Diversify Your Portfolio

Photo by Mikel Parera on Unsplash

Our Methodology

We have selected bank dividend stocks with strong dividends and dividend histories for our list below.

Bank Dividend Stocks to Diversify Your Portfolio

10. The Bank of New York Mellon Corporation (NYSE:BK)

Number of Hedge Fund Holders: 46

Dividend Yield: 2.3%

The Bank of New York Mellon Corporation (NYSE:BK) is among the most popular bank dividend stocks to diversify your portfolio, because of its strong backing by Warren Buffett. The bank offers custody, trust and depositary, accounting, exchange-traded funds related, and other services to its customers.

Wells Fargo analyst Mike Mayo holds an Equal Weight rating on The Bank of New York Mellon Corporation (NYSE:BK) shares as of this January.

The company's EPS was $1.04 in the fiscal fourth quarter of 2021, beating estimates by $0.03. Its revenue also beat estimates by $41.42 million, and stood at $4.02 billion.

Warren Buffett's Berkshire Hathaway is the largest stakeholder in The Bank of New York Mellon Corporation (NYSE:BK), holding 72,357,453 shares, worth over $4.2 billion, in the company. The total number of hedge funds holding stakes in the company in the third quarter was 46, with a total stake value of $4.7 billion.

Like Morgan Stanley (NYSE:MS), Bank of America Corporation (NYSE:BAC), and Citigroup Inc. (NYSE:C), The Bank of New York Mellon Corporation (NYSE:BK) is among the most renowned bank stocks to invest in this year.

9. JPMorgan Chase & Co. (NYSE:JPM)

Number of Hedge Fund Holders: 101

Dividend Yield: 2.6%

JPMorgan Chase & Co. (NYSE:JPM) is a financial services company operating through its Consumer & Community Banking (CCB), Corporate & Investment Bank (CIB), Commercial Banking (CB), and Asset & Wealth Management (AWM) segments. This bank stock has raised its dividend for the past nine years, making it one of the best bank dividend stocks to diversify your portfolio.

Erika Najarian, an analyst at UBS, holds a Buy rating on JPMorgan Chase & Co. (NYSE:JPM) shares as of this January.

The EPS for JPMorgan Chase & Co. (NYSE:JPM) in the fiscal fourth quarter of 2021 was $3.33, beating estimates by $0.30. Its revenue was $29.3 billion.

In the third quarter of 2021, 101 hedge funds were long JPMorgan Chase & Co. (NYSE:JPM), with a total stake value of $5.6 billion, compared to 108 hedge funds in the previous quarter, with a total stake value of $4.9 billion.

Miller Value Partners, an investment management firm, mentioned JPMorgan Chase & Co. (NYSE:JPM) in its fourth-quarter 2021 investor letter. Here's what they said:

“I remember writing about the attractiveness of JP Morgan (JPM) right before it lost about a third of its value in the third quarter of 2011 (which didn’t please some of my colleagues!). I believed JPM was a high-quality bank whose prospects were undervalued due to the overhang on the space. It made money every year through the financial crisis.

In the decade-plus since then, JPM has beaten the market nicely (+417% versus SPX +345%) despite significant headwinds for banks (S&P Financial Sector +286%) and value stocks. Low market expectations are a key ingredient to attractive long-term returns!

An earthquake after-shock metaphor helps to explain the situation. Earthquakes relieve tension in physical systems, but aftershocks are common. These aftershocks aren’t as serious as the original event because stresses have been relieved. The financial crisis alleviated tensions in the financial system as weaker players either perished or were shored up with capital. Lessons learned impacted behavior (lower risk-taking behavior and higher propensity for monetary authorities to intervene supportively), which reduced future risk.

Those realities didn’t matter in the short term, but they sure did in the long term.”

8. Morgan Stanley (NYSE:MS)

Number of Hedge Fund Holders: 65

Dividend Yield: 2.9%

Morgan Stanley (NYSE:MS) is among the most sought-after bank dividend stocks to diversify your portfolio, with over 60 hedge funds holding stakes in it. The company provides capital raising and financial advisory services, alongside other financial products and services.

Barclays' Jason Goldberg holds an Overweight rating on Morgan Stanley (NYSE:MS) shares as of this January.

The company's earnings history shows an EPS of $2.08 in the fiscal fourth quarter of 2021, beating estimates by $0.12. Its revenue was $14.52 billion.

Our data shows 65 hedge funds long Morgan Stanley (NYSE:MS) in the third quarter, with a total stake value of $4.9 billion. Eagle Capital Management is the largest stakeholder for Morgan Stanley (NYSE:MS) as of the third quarter of 2021, holding 14,561,371 shares worth over $1.4 billion.

7۔ KeyCorp (NYSE:KEY)

Number of Hedge Fund Holders: 36

Dividend Yield: 3٪

KeyCorp (NYSE:KEY), the holding company for KeyBank National Association, provides retail and commercial banking products and services in the US. It is among the safest bank dividend stocks to diversify your portfolio, having raised its dividend for the past 11 years.

Erika Najarian, an analyst at UBS, holds a Buy rating on shares of KeyCorp (NYSE:KEY), as of this January.

The company's fiscal fourth quarter of 2021 EPS was $0.64, beating estimates by $0.07. Its revenue was $1.95 billion, also beating estimates by $145.28 million.

Out of 867 hedge funds, 36 held stakes in KeyCorp (NYSE:KEY) in the third quarter, worth $399 million. Out of these hedge funds, Pzena Investment Management is the largest stakeholder in KeyCorp (NYSE:KEY) shares, holding 2,823,949 shares worth about $65 million.

KeyCorp (NYSE:KEY) is a bank dividend stock highly popular among hedge funds today, as shown by our hedge fund data. In that manner, it is a notable stock choice, much like Morgan Stanley (NYSE:MS), Bank of America Corporation (NYSE:BAC), and Citigroup Inc. (NYSE:C).

6. Toronto-Dominion Bank (NYSE:TD)

Number of Hedge Fund Holders: 17

Dividend Yield: 3.1%

Toronto-Dominion Bank (NYSE:TD) is a Canada-based bank offering financial products and services such as personal deposits, cash management, and investment products. The company has steadily grown its dividend for the past six years, making it one of the most lucrative bank dividend stocks to diversify your portfolio.

As of this February, Meny Grauman from Scotiabank holds a Sector Perform rating on Toronto-Dominion Bank (NYSE:TD) shares.

The company's earnings history shows an EPS of $1.63 and revenue of $8.06 billion. Both beat estimates by $0.10 and $321.4 million respectively. Toronto-Dominion Bank (NYSE:TD) also gained 22% in the past six months and 5.5% year to date.

Hedge fund data for the third quarter of 2021 shows 17 hedge funds long Toronto-Dominion Bank (NYSE:TD) in that quarter, with a total stake value of $294 million.

While Morgan Stanley (NYSE:MS), Bank of America Corporation (NYSE:BAC), and Citigroup Inc. (NYSE:C) are among the top bank stocks to invest in today, Toronto-Dominion Bank (NYSE:TD) is another stock worth keeping an eye on.

Click to continue reading and see 5 Bank Dividend Stocks to Diversify Your Portfolio.

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Disclosure: None. 10 Bank Dividend Stocks to Diversify Your Portfolio is originally published on Insider Monkey.