This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

5 Bank Stocks With High Dividends You Can Trust (Update 1)

Updated with commentary on banking industry trends for dividend increases from KBW.

NEW YORK (TheStreet) -- Common stocks of banks are becoming increasingly attractive for income-seeking investors and now is the time to see what fits best for your portfolio.

New preferred stock issues have seen rates significantly decline this year and, of course, the Federal Reserve's most recent economic stimulus moves aren't helping matters, as the central bank continues doing everything it can to keep long-term rates low.

This, or course, is no help for income-seeking investors, however, the growing evidence of a housing recovery is good news for bank stocks, many of which are still trading below their typical valuations to book value and forward earnings estimates, and with quality names easily covering generous dividend payouts, there are some solid growth and income plays out there.

KBW on Thursday published some statistics showing a power trend for dividend increases in the banking industry. According to KBW analyst Melissa Roberts, "44 banks increased, initiated or reinstated their quarterly cash dividend" during the third quarter, and of that total, 25 had received government bailout assistance through the Troubled Assets Relief Program, or TARP, "that fully repaid their TARP investment."

Meanwhile, only two two banks cut their dividends during the third quarter, while two skipped a dividend, and one publicly traded bank -- United Community Bancorp (UCBA) of Lawrenceburg, Ind. -- discontinued paying a dividend.

Roberts added that "Since 2011, 147 banks engaged in 264 dividend increases (inclusive of initiations and reinstatements)."

Beginning with bank and thrift stocks rated a "Buy" from TheStreet Ratings, we then used data provided by Thomson Reuters Bank Insight to narrow the list down to the actively traded names -- with average daily trading volume of over 40,000 shares -- that have the highest dividend yields, while also paying out less than 60% of their earnings over the past 12 months through June 30.

TheStreet Ratings takes a very conservative, long-term approach to stock ratings, placing its emphasis on long-term total returns as well as revenue trends and capital strength and dividends. The ratings also consider short-term performance, financial stability and volatility.

When we took a similar approach to identifying bank stocks with safe and attractive dividend yields back in early June, JPMorgan Chase (JPM) made the cut, because the stock had tanked in the wake of CEO James Dimon's initial announcement of the hedge trading losses resulting from the activity of the "London Whale."

Following Dimon's announcement in May, JPMorgan announced it was suspending its common share buybacks, but planned to maintain its dividend. When JPMorgan's stock closed at $31.00 on June 4, the shares had a dividend yield of 3.87%, based on a quarterly payout of 30 cents.

Since then, JPMorgan posted a second-quarter profit of $5 billion, despite booking $4.4 billion in hedge trading losses. The shares have recovered 32%, closing Tuesday at $40.92, with the dividend yield declining to a still-attractive 2.93%, which among the 24 components of the KBW Bank Index (I:BKX) is only exceeded by Peoples United Financial (PBCT) and New York Community Bancorp (NYB).

1 of 7

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,912.11 -70.48 -0.42%
S&P 500 1,969.95 -8.96 -0.45%
NASDAQ 4,442.6980 -2.2110 -0.05%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs