Banking Stocks For Current Yield And Future Dividend Growth

In 2007 the financial sector was responsible for $51 billion in dividend payments to shareholders. By 2010, that amount had decreased to just $19 billion. The mortgage crisis forced many banks to cut or even suspend dividend payments. Returning the clock to present day, it is hard not to get excited about the potential for bank stocks in the current market. The Financial Sector ETF (XLF) has gained nearly 20% since the beginning of the year. The majority of banks are passing the government mandated "stress tests" and dividend payments are increasing on a regular basis once again.

It's interesting to see the similarities among the stocks in each of these three groups. WFC and JPM each have had strong dividend growth while paying around 3% yield. TD, BMO and BNS all are paying 4% or more with similar payout ratios but have had increases in the low single digits. FLIC and SASR are each paying around 3% with higher dividend increases, but do not have near the dividend history that the larger banks have. Since I already hold PNC I am leaning towards diversifying away from the large U.S. banks despite WFC and JPM's impressive dividend growth. SASR and FLIC have made strong comebacks from the recent financial crisis and still appear to have room for dividend growth based on their current payouts.

Source: Seeking Alpha

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