10 Best Regional Bank Dividend Stocks to Buy
In this article, we discuss 10 best regional bank dividend stocks. You can skip our detailed analysis of the banking sector and its performance over the years, and go directly to read 5 Best Regional Bank Dividend Stocks to Buy.
The US banking sector faced significant challenges this year due to the troubles encountered by major banks in the country, including Silicon Valley Bank (SVB), First Republic Bank, and Signature Bank (NASDAQ:SBNY). Concerned bank customers and investors rushed to withdraw their funds, prompting the federal government to take strong measures to prevent a broader panic that could disrupt the entire financial system. According to CNN, the three banks collectively had about $559 billion in total assets, which, when adjusted for inflation, exceeds the $523 billion held by the 25 banks that failed in 2008.
Following this upheaval in the banking sector, regulators seized First Republic Bank in May and reached an agreement to sell most of its operations to JPMorgan Chase & Co. (NYSE:JPM), ensuring stability and mitigating the risks associated with the situation. JPMorgan will be taking responsibility for all of First Republic's deposits, both insured and uninsured, amounting to $92 billion. Additionally, they are acquiring a large portion of the bank's assets, which include approximately $173 billion in loans and $30 billion in securities.
Also read: 12 Best Performing Bank Stocks in 2023
Though the situation has been handled as of now, the reasons behind the regional banking crisis in March are still active. JPMorgan Chase CEO Jamie Dimon mentioned that the crisis that caused the downfall of three regional U.S. banks this year has mostly subsided after the resolution of the First Republic. However, rising interest rates are causing banks to face bigger losses on securities and prompting savers to withdraw their cash, affecting the banks' profits. Additionally, losses on loans, especially in commercial real estate, are starting to impact banks' earnings. As of June 30, total deposits in US commercial banks stand at $17.4 trillion, down from over $18 trillion during the same period last year. In addition to this, bank stocks are also declining this year, as the S&P Bank Select Industry is down by 10.37% year-to-date, compared with a 19.4% return of the S&P 500.
That said, the Fed’s recent bank stress test showed that all 23 big banks involved would have enough money to handle losses of up to $541 billion, even in a worst-case scenario where unemployment reaches 10% and the stock market drops by 45%, as reported by Barron’s. After successfully passing the stress test, numerous major banks have made announcements to increase their dividend payments. Some of the best dividend stocks in the banking sector such as Morgan Stanley (NYSE:MS), JPMorgan Chase & Co. (NYSE:JPM), and Wells Fargo & Company (NYSE:WFC) declared hikes in their payouts. In view of this, we will discuss some regional bank stocks that pay dividends. To know more about regional bank stocks, read Top 25 Regional Banks Stocks.
Photo by Mikel Parera on Unsplash
Our Methodology:
For this list, we scanned Insider Monkey's database of 943 hedge funds as of Q1 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 10 stocks with the highest number of hedge fund investors and ranked them in ascending order of hedge funds’ sentiment towards them.
10. Cullen/Frost Bankers, Inc. (NYSE:CFR)
Number of Hedge Fund Holders: 23
Cullen/Frost Bankers, Inc. (NYSE:CFR) is a Texas-based bank holding company that provides a wide range of banking and financial services to its consumers. The company reported strong earnings in the first quarter of 2023 with its revenue of $531 million showing a 42.2% growth on a year-over-year basis. Its net income available to common shareholders came in at $176 million, up from $97.4 million in the prior-year period.
Cullen/Frost Bankers, Inc. (NYSE:CFR) has a track record of raising dividends for 29 consecutive years, which makes it one of the best dividend stocks on our list. It currently offers a quarterly dividend of $0.87 per share and has a dividend yield of 3%, as of July 16. In addition to popular bank stocks like Morgan Stanley (NYSE:MS), JPMorgan Chase & Co. (NYSE:JPM), and Wells Fargo & Company (NYSE:WFC), CFR is also a reliable option due to its strong dividend growth track record.
As of the close of Q1 2023, 23 hedge funds in Insider Monkey's database owned investments in Cullen/Frost Bankers, Inc. (NYSE:CFR), worth collectively over $176 million. Among these hedge funds, Scopus Asset Management was the company's leading stakeholder in Q1.
Aristotle Capital Management, LLC mentioned Cullen/Frost Bankers, Inc. (NYSE:CFR) in its Q1 2023 investor letter. Here is what the firm has to say:
“Cullen/Frost Bankers, Inc. (NYSE:CFR), the Texas‐based bank, was the largest detractor for the period. Given the heightened levels of uncertainty after the collapse of SVB and Signature Bank, regional banks were scrutinized as potential vulnerabilities within the U.S. banking system. Despite the recent events, we remain confident in Cullen/Frost’s ability to withstand short‐term volatility based on itslong and proven history and strong capital position. Since the company’s inception in 1868, Cullen/Frost has employed a conservative strategy and a client service‐centric model that allowed it to be the only Texas bank to survive the 1980s Texas banking collapse, oil crisis and real estate market crash without federal assistance or a takeover, and it was also the first bank to decline TARP (Troubled Asset Relief Program) bailout funds during the Global Financial Crisis of 2008. Cullen/Frost continues to utilize this strategy, with a relatively low loan‐to‐deposit ratio of 38% and current capital ratios in excess of well‐capitalized levels. The company’s strong balance sheet management and steady, relationship‐based approach have led to consistent levels of profitability and 29 consecutive years of dividend increases. We believe Cullen/Frost remains in a strong position to navigate the current short‐term environment, continue to win market share in areas such as Houston and Dallas, and generate returns for shareholders in the long run.”
9. KeyCorp (NYSE:KEY)
Number of Hedge Fund Holders: 34
KeyCorp (NYSE:KEY) is an American regional bank headquartered in Ohio. The bank provides a wide range of services and products to retail, small businesses, corporate, and commercial clients. In its recently announced Q2 2023 earnings, the company posted revenue of $1.6 billion, down from $1.8 billion in the prior-year period. It had $758 million available in cash and due from the banks, compared with $678 million in the same period last year.
KeyCorp (NYSE:KEY) showed confidence in its cash position in its most recent quarter. The company has $752 million remaining in its share repurchase authorization through the third quarter of 2023. It currently pays a quarterly dividend of $0.205 per share for a dividend yield of 6.58%. The company maintains a 12-year track record of consistent dividend growth.
Insider Monkey's database of Q1 2023 showed that 34 hedge funds owned stakes in the company, up from 33 in the previous quarter. These stakes have a collective value of over $573.6 million. With over 16.6 million shares, Adage Capital Management was the company's leading stakeholder in Q1.
8. M&T Bank Corporation (NYSE:MTB)
Number of Hedge Fund Holders: 37
M&T Bank Corporation (NYSE:MTB) is a New York-based bank holding company. The regional bank provides services in retail, corporate, investment, and commercial banking, as well as wealth management. On May 17, the company declared a quarterly dividend of $1.30 per share, consistent with its previous dividend. It has raised its dividends each year for the past six consecutive years. With a dividend yield of 3.70% as of July 26, MTB is one of the best dividend stocks to buy.
M&T Bank Corporation (NYSE:MTB) announced its Q2 earnings on July 19 and posted a 31.3% year-over-year growth in its revenue of $2.6 billion. At the end of June 30, the company had over $1.8 billion available in cash and due from the banks, up from $1.6 billion in the prior-year period.
Of the 943 hedge funds tracked by Insider Monkey, 37 funds owned investments in M&T Bank Corporation (NYSE:MTB), worth collectively $497.3 million.
7. Citizens Financial Group, Inc. (NYSE:CFG)
Number of Hedge Fund Holders: 42
Citizens Financial Group, Inc. (NYSE:CFG) offers personal and business banking solutions to its consumers. In its recently announced earnings for the second quarter of 2023, the company reported revenue of $2.09 billion, up 5% from the same period last year. Its net income for the quarter came in at $478 million, compared with $364 million in Q2 2022.
Citizens Financial Group, Inc. (NYSE:CFG), one of the best dividend stocks on our list, returned $205 million to shareholders in dividends during its most recent quarter. The company currently offers a quarterly dividend of $0.42 per share and its dividend yield on July 26 came in at 5.18%.
As of the close of Q1 2023, 42 hedge funds monitored by Insider Monkey held investments in Citizens Financial Group, Inc. (NYSE:CFG), with a combined value of $384.6 million. With over 2.2 million shares, Holocene Advisors was the company's leading stakeholder.
6. Fifth Third Bancorp (NASDAQ:FITB)
Number of Hedge Fund Holders: 44
Fifth Third Bancorp (NASDAQ:FITB) is an Ohio-based financial services and bank holding company. The company maintains a 12-year streak of consistent dividend growth, which makes it one of the best dividend stocks in the regional banking sector. It currently pays a quarterly dividend of $0.33 per share and offers a dividend yield of 4.63%, as recorded on July 26. FITB can be added to dividend portfolios alongside Morgan Stanley (NYSE:MS), JPMorgan Chase & Co. (NYSE:JPM), and Wells Fargo & Company (NYSE:WFC).
In the second quarter of 2023, Fifth Third Bancorp (NASDAQ:FITB) generated $2.1 billion in revenues, which saw an 8.5% growth from the same period last year. The company's net income available to common shareholders came in at $562 million, up from $526 million in the prior-year period.
The number of hedge funds tracked by Insider Monkey owning stakes in Fifth Third Bancorp (NASDAQ:FITB) grew to 44 in Q1 2023, from 40 in the previous quarter. The combined value of these stakes is over $466 million.
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Disclosure. None. 10 Best Regional Bank Dividend Stocks to Buy is originally published on Insider Monkey.
