NEW YORK ( TheStreet) -- Banks boosting their dividends will lead to higher dividend yields in the benchmark S&P 500 Index, making investing more attractive to Americans who have preferred bonds. Last week the Federal Reserve gave a number of banks the green light to return additional capital to shareholders after 15 of the country's 19 biggest banks passed the government's annual stress tests. Almost immediately, banks announced dividend increases and large share-repurchase programs.
In 2011, the S&P 500 offered a dividend yield of 2.1%. Taking into consideration only the five banks that have confirmed higher dividend policies so far, the yield on the S&P 500 would increase by about 60 basis points to 2.7%. Given that it is highly likely we'll get more dividend increases from the banks as we proceed through the year, coupled with increases from other companies with improving operations and cash flow, the yield on the S&P 500 could reach close to 3% this year. In addition to the banks, Apple ( AAPL) today announced a quarterly dividend of $2.65 per share. That means the dividend yield on the S&P 500 would have been 3.5% last year. -- Written by Lindsey Bell in New York. >To follow the writer on Twitter, go to Lindsey Bell.