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In this article, we discuss the 12 best financial dividend stocks to invest in. You can skip our detailed analysis of the finance sector and dividend stocks, and go directly to read 5 Best Financial Dividend Stocks to Invest In.
The finance sector in the US involves all companies that specialize in banking, insurance, financial services, mortgages, credit cards, and other payment services. The sector is one of the most important industries in the country, contributing significantly to its GDP. According to a report published by the Securities Industry and Financial Markets Association, the US has the world’s largest capital markets, representing 41% of global equity. The country’s markets also fund 72% of its domestic economic activity. The report also mentioned that the US has over $760 billion worth of foreign investment in its financial sector, which is currently providing resources for a wide range of businesses.
Over the years, the finance sector globally has evolved a lot due to the induction of digital channels, which has significantly contributed to the sector’s returns and growth. According to a report by IBISWorld, the finance and insurance sector in the US is currently valued at over $5.7 trillion and has grown 2.5% per year on average in the last five years. The implementation of digital channels has further resulted in the industry’s impressive growth. Bloomberg cited Data Bridge Market Research’s new report, which highlighted that the digital insurance platform market will grow at a CAGR of 13.7% from 2022 to 2029. The growth will be attributed to the rising use of IoT products and cloud-based digital solutions.
Economists around the world are of the view that inflation is expected to last well into next year as well. They recommend investors load up on safe stocks that have the ability to generate stable income in current times. The S&P 500 Financial index is down 13.3% year-to-date, versus a 21.3% decline in the broader market. According to Hartford Funds, financials have performed better during past inflationary pressures because of their stable cash flows. Moreover, strong cash flows signal solid dividends which are comforting in times of financial turmoil.
Some investors are considering long-term bonds that yield more than 4%. We believe these are ok investments but don't provide any upside potential. Some financial stocks declined by more than 30% in anticipation of a US recession and offer attractive yields. We expect these stocks to deliver large capital gains as well after the stock market hits its bottom. Bearing this in mind, we will discuss some of the best financial dividend stocks to invest in. Some of the popular dividend stocks in the sector include JPMorgan Chase & Co. (NYSE:JPM), The Bank of New York Mellon Corporation (NYSE:BK), and U.S. Bancorp (NYSE:USB).
Investments, Finance
Our Methodology:
For this list, we selected companies that belong to different segments within the finance industry, such as insurance, financial services, credit card services, and banking. We carefully analyzed their dividend policies and financial health. The stocks are ranked according to their dividend yields, as recorded on November 4.
12 Best Financial Dividend Stocks to Invest In
12. Mastercard Incorporated (NYSE:MA)
Dividend Yield as of November 4: 0.62%
Mastercard Incorporated (NYSE:MA) is an American financial service and payment processing company. It offers a wide range of related services to its consumers around the globe. In Q3 2022, the company reported revenue of $5.8 billion, which showed a 15.5% growth from the same period last year. During the quarter, it repurchased shares worth over $1.6 billion and paid $474 million in dividends, which makes it one of the best dividend stocks on our list.
Mastercard Incorporated (NYSE:MA) currently pays a quarterly dividend of $0.49 per share. The company holds an eight-year track record of consistent dividend growth. As of November 4, the stock has a dividend yield of 0.62%.
In November, Mizuho maintained a Buy rating on Mastercard Incorporated (NYSE:MA) with a $380 price target, following the company's recent quarterly earnings. The firm also raised its FY22 estimates for the company.
At the end of Q2 2022, 137 hedge funds in Insider Monkey's database had investments in Mastercard Incorporated (NYSE:MA), compared with 136 a quarter earlier. These stakes have a collective value of roughly $15 billion. Among these hedge funds, Akre Capital Management was the company's leading stakeholder in Q2.
In addition to JPMorgan Chase & Co. (NYSE:JPM), The Bank of New York Mellon Corporation (NYSE:BK), and U.S. Bancorp (NYSE:USB), analysts and investors are also paying attention to Mastercard Incorporated (NYSE:MA) in the finance sector.
Baron Funds mentioned Mastercard Incorporated (NYSE:MA) in its Q2 2022 investor letter. Here is what the firm has to say:
“The Fund’s holdings in the Payments and Information Services themes also contributed to relative performance. Within Payments, lower exposure to this lagging theme and outperformance of Mastercard Incorporated (NYSE:MA) added the most value. These global payment networks are viewed as safe havens during market downturns but are also benefiting from resilient payment volumes and a sharp rebound in international travel.”
11. Visa Inc. (NYSE:V)
Dividend Yield as of November 4: 0.91%
Visa Inc. (NYSE:V) is a California-based financial services company that specializes in credit cards, debit cards, and payment cards. In October, BMO Capital maintained an Outperform rating on the stock with a $241 price target. The firm presented a positive outlook on the stock as a core portfolio holding.
In fiscal Q4 2022, Visa Inc. (NYSE:V) reported revenue of $7.8 billion, which showed a 19% growth from the same period last year. The company's cash generation remained strong during the quarter as it paid $14.8 billion to shareholders in dividends. Moreover, it also repurchased $2.9 billion worth of its shares.
On October 25, Visa Inc. (NYSE:V) announced a 20% growth in its quarterly dividend to $0.45 per share. This marked the company's 14th consecutive year of dividend growth, which makes it one of the best dividend stocks on our list. As of November 4, the stock has a dividend yield of 0.91%.
Visa Inc. (NYSE:V) was a popular stock among elite funds in Q2 2022, as 166 hedge funds in Insider Monkey’s database owned stakes in the company, compared with 159 in the previous quarter. These stakes hold a collective value of over $24 billion.
Wedgewood Partners mentioned Visa Inc. (NYSE:V) in its Q3 2022 investor letter. Here is what the firm has to say:
“Visa Inc. (NYSE:V) continues to report strong double-digit growth in payment volumes throughout the first two months of the calendar third quarter. The stock suffered after concerns about potential adverse legislation related to its credit card routing practices began to surface. Similar legislation related to the Company’s debit routing practices was passed into law back in 2010. Not unlike the previous legislation, the Company’s value proposition to merchants, consumers and bank-issuing customers and acquirers is robust enough to help blunt the potential effects the legislation might have in the near term. Over a multiyear time horizon, it would be quite difficult for any currently non-existent or even sub-scale credit routing network to add the value that Visa (or MasterCard) can already add today.”
10. S&P Global Inc. (NYSE:SPGI)
Dividend Yield as of November 4: 1.07%
S&P Global Inc. (NYSE:SPGI) is an American company that specializes in financial information and analytics. In Q3 2022, the company reported revenue of $2.86 billion, which showed a 36.8% growth from the same period last year. Through the third quarter of this year, it returned $11.7 billion to shareholders, including $749 million in cash dividends. In the first nine months, the company generated $1.2 billion in free cash flow.
S&P Global Inc. (NYSE:SPGI) currently pays a quarterly dividend of $0.85 per share. The company is one of the best dividend stocks to buy as it has been raising its dividends consistently for the past 49 years. As of November 4, the stock has a dividend yield of 1.07%.
In October, Jefferies initiated its coverage on S&P Global Inc. (NYSE:SPGI) with a Buy rating and a $397 price target, highlighting the company's revenue and its Rating business.
As of the close of Q2 2022, 84 hedge funds owned stakes in S&P Global Inc. (NYSE:SPGI), down from 97 in the previous quarter. These stakes hold a collective value of over $7.2 billion.
Baron Funds mentioned S&P Global Inc. (NYSE:SPGI) in its Q2 2022 investor letter. Here is what the firm has to say:
“Another example is S&P Global (NYSE:SPGI), the leading rating agency and data provider, whose stock declined 29.0% year-to-date and 17.5% during the second quarter as a result of growing investor concerns over the slowdown in debt issuance. While debt issuance volumes have seen a dramatic decline – the worst quarterly decline in a decade (down 41% year-over-year in the second quarter based on Goldman Sachs estimates), – and this led management to withdraw its 2022 guidance in early June, we do not believe it would result in a permanent loss of capital.
First, ratings represent only about 30% of S&P Global’s total revenues. Second, despite inherent volatility in quarterly or annual issuance, over the long-term issuance volumes follow the trends in levels of debt outstanding, which has compounded in the mid-single digits for many years. Lastly, we believe that S&P Global’s strong competitive positioning will enable it to continue benefiting from pricing power, while taking advantage of secular tailwinds such as the growth in passive and ESG investing, international expansion, and the growing demand for data analytics.”
9. American Express Company (NYSE:AXP)
Dividend Yield as of November 4: 1.44%
American Express Company (NYSE:AXP) is a New York-based credit card service company that also offers a wide range of other financial services. The company has been paying regular dividends to shareholders for the past 30 years. It currently offers a quarterly dividend of $0.52 per share for a dividend yield of 1.44%, as of November 4. Moreover, it paid $14 million in dividends to shareholders during Q3 2022, which makes it one of the best dividend stocks to buy.
In October, BMO Capital appreciated the company’s higher net interest income and lower costs. The firm lifted its price target on American Express Company (NYSE:AXP) to $166 with a Market Perform rating on the shares.
As of the close of Q2 2022, 67 hedge funds tracked by Insider Monkey owned stakes in American Express Company (NYSE:AXP), compared with 69 a quarter earlier. These stakes have a consolidated value of over $25.2 billion. Warren Buffett’s Berkshire Hathaway was the company’s leading stakeholder in Q2.
8. The Travelers Companies, Inc. (NYSE:TRV)
Dividend Yield as of November 4: 2.03%
The Travelers Companies, Inc. (NYSE:TRV) is an American insurance company that specializes in commercial property casualty insurance. In November, MKM Partners raised its price target on the stock to $220 with a Buy rating on the shares, citing the company's Q3 earnings beat. The firm also appreciated the company's overall fundamentals.
During the third quarter of 2022, The Travelers Companies, Inc. (NYSE:TRV) returned $722 million to shareholders, including $501 million in share repurchases. The company's revenue for the quarter came in at $8.62 billion, which showed a 10.2% growth from the same period last year.
The Travelers Companies, Inc. (NYSE:TRV) has been making consecutive dividend payments for the past 33 years and also maintains a 16-year streak of dividend growth. This makes the company one of the best dividend stocks on our list. It currently pays a quarterly dividend of $0.93 per share with a dividend yield of 2.03%, as of November 4.
At the end of Q2 2022, 31 hedge funds tracked by Insider Monkey owned stakes in The Travelers Companies, Inc. (NYSE:TRV), down from 37 in the previous quarter. These stakes hold a collective value of over $433.8 million. With over 3 million shares, First Eagle Investment Management owned the largest position in the company in Q2.
7. CME Group Inc. (NASDAQ:CME)
Dividend Yield as of November 4: 2.34%
CME Group Inc. (NASDAQ:CME) is a Chicago-based financial and global markets company. It is one of the best dividend stocks on our list as it has been raising its dividends consistently for the past 12 years. Moreover, the company has paid dividends to shareholders for 18 years in a row. It offers $1.00 per share in quarterly dividends and has a dividend yield of 2.34%, as of November 4.
In Q3 2022, CME Group Inc. (NASDAQ:CME) reported revenue of $1.23 billion, up 10.8% from the same period last year. The company ended the quarter with $2.2 billion in cash and cash equivalents and its total current assets amounted to over $178.4 billion. Moreover, it returned $18.8 billion to shareholders in dividends and share repurchases since 2012.
Following the company's solid Q3 results, Deutsche Bank raised its price target on CME Group Inc. (NASDAQ:CME) to $202 with a Buy rating on the shares.
Of the 895 elite funds tracked by Insider Monkey, 56 hedge funds owned positions in CME Group Inc. (NASDAQ:CME) in Q2, compared with 58 in the previous quarter. The stakes owned by these hedge funds hold a collective value of over $2.7 billion.
ClearBridge Investments mentioned CME Group Inc. (NASDAQ:CME) in its Q4 2021 investor letter. Here is what the firm has to say:
“CME Group, for example, maintains a dominant franchise in electronic commodities and options trading with high incremental margins. Its interest rate trading business had been depressed coming out of the recession, but with a tightening policy environment, it now provides upside optionality that augments robust free cash flow growth and capital return. Willscot Mobile Mini is another compounder that executed well through the pandemic but was not initially recognized for the synergies of its Mobile Mini acquisition. The deal has reduced costs and created greater operating leverage as the company rides the tailwinds of improving industrial production and construction.”
6. Bank of America Corporation (NYSE:BAC)
Dividend Yield as of November 4: 2.39%
Bank of America Corporation (NYSE:BAC) is an American multinational investment bank and financial services holding company. JPMorgan raised its price target on the stock to $39 with an Overweight rating on the shares, presenting a positive stance on the banking sector.
Bank of America Corporation (NYSE:BAC) has been raising its dividends consistently for the past nine years, coming through as one of the best dividend stocks. It currently pays a quarterly dividend of $0.22 per share and has a dividend yield of 2.39%, as of November 4. The company can be a good addition to dividend portfolios alongside JPMorgan Chase & Co. (NYSE:JPM), The Bank of New York Mellon Corporation (NYSE:BK), and U.S. Bancorp (NYSE:USB).
At the end of Q2 2022, 99 hedge funds tracked by Insider Monkey owned stakes in Bank of America Corporation (NYSE:BAC), the same as in the previous quarter. The combined value of these stakes is roughly $36 billion.
Diamond Hill Capital Management mentioned Bank of America Corporation (NYSE:BAC) in its Q2 2022 investor letter. Here is what the firm has to say:
“Bank of America Corporation (NYSE:BAC) shares were weak in Q2 as the market became increasingly focused on the possibility of a near-term recession and the potential for credit losses along with current fee revenue pressures.”
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Disclosure. None. 12 Best Financial Dividend Stocks to Invest In is originally published on Insider Monkey.
