These stocks have the highest dividend yields of the stress-test passers
The average dividend yield of the stress-test passers is now well above the S&P 500
If you’re looking for a high-yielding bank stock, among those most likely to survive the next financial meltdown, check out Huntington Bancshares Inc. and KeyCorp.
A number of U.S.-based financial companies announced late Thursday plans to raise their dividends, with most set to have dividend yields well above the broader financial sector and the S&P 500, as passing the Federal Reserve’s latest stress tests freed them up to boost shareholder returns.
Huntington Bancshares HBAN, -0.87% said the Fed cleared its plan to increase its quarterly dividend by 27% to 14 cents a share. Based on Thursday’s stock closing price, the new annual dividend rate implies a dividend yield of 3.76%, compared with the yield for the SPDR Financial Select Sector exchange-traded fund XLF, +0.00% of 1.69% and the implied yield for the S&P 500 indexSPX, +0.08% of 1.94%, according to FactSet.
KeyCorp KEY, -0.31% said it plans to hike its dividend by 42% to 17 cents a share, which implies a dividend yield of 3.47%.
Huntington Bancshares’s stock slipped 0.2% in afternoon trade and KeyCorp shares gained 0.4%, while the financial ETF (XLF) tacked on 0.7% and the S&P 500 advanced 0.6%.
Of the banks that passed the U.S.-based stress tests, Wells Fargo & Co.’s stockWFC, +3.37% was the biggest gainer, running up 4.2%, after the consumer bank said it planned to lift its dividend by 10%. Meanwhile, shares of Goldman Sachs Group Inc. GS, -1.28% slipped 0.5% and of Morgan Stanley MS, -1.84%lost 1.2%, after the Fed limited the firms’ payouts.
J.P. Morgan analyst Vivek Juneja said the large 25% increase in dividends on average reflects the benefit of tax reform and tepid loan growth, which added to strong capital ratios, and supports his outlook for earnings at most of the banks he covers.
“The good results should provide support to the sector, which has lagged recently on the concerns about implications of tariffs and trade wars,” Juneja said. The XLF’s second-straight gain on Friday snapped a record-breaking 13-session losing streak through Wednesday.
The following is a list of the U.S. based stress-test passers that will have the highest implied dividend yields, based on Thursday’s stock closing prices:
|U.S.-based stress-test passer (ticker)||Planned new quarterly dividend||Increase from previous dividend||Implied dividend yield|
|Huntington Banchares Inc. (HBAN)||$0.14||27%||3.76%|
|Wells Fargo & Co. (WFC)||$0.43||10%||3.21%|
|BB&T Corp. (BBT)||$0.405||8%||3.20%|
|Regions Financial Corp. (RF)||$0.14||56%||3.11%|
|Fifth Third Bancorp (FITB)||$0.22||22%||3.06%|
|J.P. Morgan Chase & Co. (JPM)||$0.80||43%||3.05%|
|SunTrust Banks Inc. (STI)||$0.50||25%||3.04%|
|U.S. Bancorp (USB)||$0.37||23%||2.98%|
|PNC Financial Services Group Inc. (PNC)||$0.95||27%||2.80%|
|Citizens Financial Group Inc. (CFG)||$0.27||23%||2.73%|
|Citigroup Inc. (C)||$0.45||41%||2.69%|
|Morgan Stanley (MS)||$0.30||20%||2.48%|
|M&T Bank Corp. (MTB)||$1.00||25%||2.37%|
|Ally Financial Inc. (ALLY)||$0.15||15%||2.33%|
|Discover Financial Services (DFS)||$0.40||14%||2.28%|
|Northern Trust Corp. (NTRS)||$0.55||31%||2.12%|
|Bank of America Corp. (BAC)||$0.15||25%||2.09%|
|Bank of New York Mellon Corp. (BK)||$0.28||17%||2.06%|
|State Street Corp. (STT)||$0.47||12%||2.00%|
|Zions Bancorporation (ZION)||$0.24||0%||1.81%|
|Capital One Financial Corp. (COF)||$0.40||0%||1.73%|
|American Express Co. (AXP)||$0.39||11%||1.61%|
|Goldman Sachs Group Inc. (GS)||$0.85||6.3%||1.52%|
|Comerica Inc. (CMA)||$0.34||0%||1.49%|
|CIT Group Inc. (CIT)||$0.16||0%||1.29%|
|Average yield: 2.47%; Median yield: 2.43%; XLF implied yield 1.69%; S&P 500 implied yield 1.94%|