3 Top Dividend Stocks in the U.S. Banking Sector

The U.S. banking sector has always been relatively high yielding, although it has gone through great turbulence over the last decade. Dodd-Frank regulation has helped to improve the sector’s weaknesses, raising the standards for the sector’s lending business and implementing capital reserve requirements for better operational efficiency. With the Dodd-Frank, the financial services industry also got the Financial Stability Oversight Council, which now oversees and facilitates communication among the industry’s nine regulatory agencies.

With the industry’s regulatory improvements, the banking sector is now positioned and ready to take advantage of the Fed’s tightening of borrowing rates, as net interest is a large revenue driver for banks. Among large-cap financial stocks, there are a number of companies with a forward dividend yield above 2.5%. For investors seeking added return from the sector’s potential gains, People's United Financial, Inc. (PBCT), BB&T Corp. (BBT) and JPMorgan (JPM) rise to the top as leading dividend investments. In addition to a steady dividend, all three companies have demonstrated positive free cash flow with which to pay dividends and strong dividend coverage ratios, represented by earnings per share divided by dividends per share.

Source: Investopedia

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