3 Bank Stocks That Are All-Stars for Passive Income


As stock prices have fallen this year, there are some seriously yielding dividends, which is why investors may be looking at passive income-paying stocks as a good option over growth stocks right now. This allows you to generate predictable, consistent returns until the market recovers, at which point most stocks should rallied.

Bank stocks are known for paying good dividends. Here are three passive income all-stars.

1. MorganStanley

Investment banking and asset management company MorganStanley (MRS 2.04%) recently announced that it plans to increase its quarterly dividend to $0.775 per share for the third quarter, up 11% sequentially. It also comes as the bank has approved a new $20 billion share buyback program to be implemented over the next few years.

With the new dividend, Morgan Stanley will have an annual dividend yield of around 4.1%, with shares trading around $77 at the time of this writing. With analysts forecasting earnings of $147.95 on average for 2022, that’s also only a roughly 21% dividend payout ratio, leaving plenty of room for growth.

2. Citizens Financial Group

Citizens Financial Group (CFG 2.50%) is a $192 billion wealth bank headquartered in Rhode Island. With shares trading up more than 27% this year, Citizens’ stock price is around $36 and has a current annual dividend yield of 4.37%. Management said in a recent press release that the bank’s board would consider increasing the dividend in the current quarter.

While the bank’s payout ratio is on the high end of where banks tend to fall, currently nearly 37%, that’s actually management’s goal. In addition, Citizens has a lot of capital. The Common Equity Tier 1 (CET1) ratio, which measures a bank’s Tier 1 capital as a percentage of its risk-weighted assets such as loans, was 9.7% at the end of the first quarter. The regulatory requirement is likely to be around 7.9% again in 2023, leaving plenty of room to continue paying and increasing the dividend if it so chooses.

3. New York Community Bancorp

The $61 billion multifamily lender New York Community Bancorp (New York 1.62%) hasn’t increased its dividend for many years, but it’s still paid a tremendous dividend yield. As shares have fallen to around $9 this year, the bank’s dividend yield is a whopping 7.3%. You will have a hard time finding too many banks that pay a higher rate of return, if any.

Though the stock hasn’t performed well in many years, management is actively working to transform its business model with new vertical lending and building a much stronger deposit base. A large part of this transformation will be the bank’s previously announced acquisition of Flagstar Bancorp based in Michigan. That merger has now been postponed, but management still expects to eventually complete it and achieve similar financial benefits that were originally promised. CEO Thomas Cangemi also said he expects the bank to maintain the current dividend once the acquisition is complete.


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