Does PNC have the best dividend among its banking peers?

Oith the stock market moving into negative territory this year, dividends become even more important for investors. Not only do they provide income, but they also increase a stock’s total return.

Banks are cyclical in that they thrive when the economy is strong and people are borrowing and investing. It’s just the opposite in a down economy. But one of the world’s greatest investors, Warren Buffett, founder and CEO of Berkshire Hathawaylikes banks because he knows that booms last much longer than recessions, so he can rely on banks to take advantage of those times of economic growth.

But due to the cyclical nature of banks, dividends tend to stagnate and sometimes shrink, as we saw during the COVID-19 recession. But a bank that has maintained and increased its dividend is PNC Financial Services Group (NYSE:PNC). It just increased its dividend again this month, which begs the question: does PNC have the best dividend among the big banks?

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PNC increases its dividend by 20%

PNC Financial is a Pittsburgh-based bank with approximately $541 billion in assets. It is the sixth largest bank in the United States and its takeover of the American banking operations of BBVA (Banco Bilbao Vizcaya Argentaria) last year gives it a national footprint.

PNC just increased its quarterly dividend this month to $1.50 per share, payable May 5. This represents a 20% increase from last quarter when the payout was $1.25. If the bank maintains this payment throughout the year, it would amount to $5.75 per share. The stock was worth about $175 per share as of April 14 and has a dividend yield of 3.4%. This is a higher return than the median for the banking sector, which is around 3%.

The bank has a payout ratio of around 36%, which means that around 36% of its profits go to the dividend. It’s a good lasting number, just in the right place. Anything above 50% to 60% means the banking company could be paying more than it can afford for the dividend, while a payout ratio below 20% means the company can probably afford the dividend. increase.

Also, in a sign of PNC’s consistency, it has increased its annual dividend per share for 12 consecutive years, since 2010, when it paid $0.10 per share per quarter. Since 2017, when it paid about $2.60 per share per year in dividends, PNC has more than doubled the payout.

Is this the best dividend in the banking sector?

By any measure, PNC is a great dividend stock. If you bought 30 shares right now, assuming a dividend of $1.50 per share per quarter, you would have about $180 in dividend income after four quarters. In terms of total dividend paid, it is by far the highest among its peers. But it has a higher stock price at around $175. Let’s look at some of PNC’s peers to see how it compares in other categories.

Bank

2022
Dividend
Yield

10 years
Total
To return to

2017
Total
Dividend
2022
annualized
Dividend

Fluent
Payment
Report

JPMorgan Chase 3.1% 282.8% $2.04 $4 22.8%
Bank of America 2.1% 403.2% $0.195 $0.42 25.2%
Citigroup 3.9% 75.9% $0.64 $2.04 21%
Wells Fargo 1.6% 84.9% $1.56 $1 14.4%
American bank 3.4% 121.9% $1.16 $1.84 30%
PNC Financial 3% 260.4% $2.60 $6 33%

Source: Y Charts. Data as of April 18, 2022 at 11 a.m. Note: the 2022 annualized dividend is the current dividend rate multiplied by four quarters; the 10-year total return includes the reinvestment of dividends. Author’s table.

Of the six largest banks, three have higher yields, Citigroup (3.9%), American bank (3.4%) and JPMorgan Chase at 3.1%. In terms of payout ratio, PNC is around 33%, US Bancorp is around 30%, while the others are below 30%.

PNC has the longest streak among the six largest banks with 12 consecutive years of dividend increases. Both JPMorgan Chase and US Bancorp have increased their dividends for 11 straight years, while the other three have streaks of two years or less.

Finally, let’s look at how the stock price of each of these banks has evolved over the past 10 years. As of April 14, only Bank of America (15.8%) and JPMorgan Chase (11.8%) have an annualized return higher than PNC’s 11.1% annualized return over the past decade.

So, is PNC the best dividend-paying stock among its big-bank peers? Citigroup has the highest return, but not the consistency. US Bancorp has a similar return and consistency track record, as well as a payout ratio, but PNC has a much higher total return. JPMorgan Chase is comparable to PNC in most categories, including total return, but has a smaller annual payout.

You could certainly argue that PNC has been the top dividend-paying stock among major banks over the past decade, along with JPMorgan Chase and US Bancorp.

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Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Citigroup is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Dave Kovaleski has no position in the stocks mentioned. The Motley Fool owns and recommends Berkshire Hathaway (B shares). The Motley Fool recommends the following options: $200 long calls in January 2023 on Berkshire Hathaway (B shares), $200 short puts in January 2023 on Berkshire Hathaway (B shares) and short calls of $265 in January 2023 on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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