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In choppy and uncertain markets, dividend stocks are an especially good investment.
Not only are they often stocks of large, stable companies that are built to navigate market volatility, they are usually value stocks, which tend to outperform in market downturns.
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But more importantly, they provide dividend income that can be reinvested back in the stock to boost the total return, which comes in handy when markets are sluggish.
Bank stocks, particularly large banks, are typically among the best dividend stocks, because banks are required by regulators to maintain enough capital to withstand severe economic stresses. So that makes it more likely that the capital will be there to maintain or raise dividends even in the worst markets.
In recent weeks, three of the largest banks, PNC Financial (NYSE: PNC), Morgan Stanley (NYSE: MS), and Bank of America (NYSE: BAC) approved substantial dividend increases. All three should be on your radar, but one stands out.
PNC, the eighth largest bank with about $609 billion in assets, raised its dividend 18% in the third quarter to $2 per share.
It pays out a high yield of 3.6% and has raised its dividend for 15 straight years. The stock price is up 6% year-to-date and 20% during the past year.
PNC is in a strong position to maintain its dividend, coming off a second quarter where it had record revenue, fee income, and net interest income. Revenue jumped 21% to $6.9 billion while earnings rose 25% year-over-year to $4.81 per share, including earnings and costs associated with the acquisition of FirstBank.
Also, PNC raised its outlook for 2026 revenue, loans, fee income, and net interest income. It now expects a 13% increase in revenue for the year, up from a projected 11%.
It has a common equity tier 1 (CET1) ratio of 9.9%, which is well above its required minimum of 7%, which suggests it has plenty of capital to maintain its dividend. It also has a safe and moderate payout ratio of 37%.
Morgan Stanley increased its dividend by 15% in the third quarter to $1.15 per share at a yield of 2.4%. This is the 12th straight annual increase for Morgan Stanley, the 11th largest U.S. bank with $419 billion in assets.
Morgan Stanley stock is up 7% this year and 25% during the past 12 months.
It also posted huge numbers in Q2, with record revenue of $21.3 billion, up 27% year-over-year. Earnings soared 62% to $3.46 per share. Morgan Stanley got a big lift from its institutional securities business, which includes investment banking, as revenue rose 46% in this segment.
Morgan Stanley has tons of excess capital, with a CET1 ratio of 14.8%, which is 300 basis points higher than the 11.8% required minimum.
It also has an excellent payout ratio of 33%, meaning it has plenty of room to raise its dividend.
Bank of America also posted a significant dividend raise, boosting it 14% to $0.32 per share at a yield of 2.4%. The second largest U.S. bank with $2.6 trillion in assets has raised its annual payout for 12 straight years.
Bank of America stock is down 1% this year and up 12% during the past 12 months.
Bank of America posted revenue of $31.6 billion in Q2, up 15%, with net interest income (NII), up 9%, accounting for $16 billion of the total. Trading revenue, asset management fees, and investment banking income were also up in the quarter.
For the full year, the bank updated its outlook, calling for NII to rise to between 6% and 8%.
Bank of America has a CET1 ratio of 11.8%, which is above its regulatory minimum of 10%. It has a low payout ratio of 25% so it should have no problem maintaining its dividend.
All three of these stocks are buys for their dividends, but if I had to favor one of them it would be PNC for its significantly higher yield, its consistency, and its outlook.
Some 72% of Wall Street analysts rate PNC stock as a buy with a median price target of $273 per share, suggesting 24% upside. It is also dirt cheap, with a forward price-to-earnings ratio of a little more than 10.
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Bank of America is an advertising partner of Motley Fool Money. Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
3 Bank Stocks to Buy That Raised Their Dividends at Least 14% This Year was originally published by The Motley Fool
