Banking on Bank Dividends

Yield-starved investors soon may have another place to reap higher dividends: bank stocks. The sector has long been popular with retail investors because of its healthy dividends. But banks were forced to cut or suspend their payouts during the financial crisis. Now, many are anxious to raise dividends or buy back shares to underscore their improved health. But before they can, banks must pass the Federal Reserve's latest "stress test"—the results of which will be disclosed to them later this month.

Bank stocks have run up in recent months partly on anticipation of higher dividend yields. On Tuesday, shares of Bank of America, whose current dividend yield is 0.28%, jumped 4.7% on news that it had asked the Fed to allow it to approve a "moderate" increase in its dividend in the second half of the year. Other financial stocks, including J.P. Morgan, American Express Co., PNC Financial Services Group Inc., Citigroup Inc. and Wells Fargo & Co. also rose in trading on Tuesday.

Source: Wall Street Journal

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