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America’s biggest banks now pay attractive dividend yields, so long as they’re safe

Given the downdraft in bank stock prices this year, some of the biggest financial companies in the U.S. are all of the sudden offering sky high dividend yields. Those lofty payouts are attractive in absolute terms, and even when compared with prevailing Treasury yields. Keep in mind that the 2-year note is paying north of 4.4% as of Thursday, while the 10-year yield traded just below 4% Take a look at what some of the biggest dividends banks pay: Citigroup , KeyCorp and US Bancorp are paying around 5% each. PNC Financial Services yields 4.1%, Comerica 3.9% and JPMorgan Chase 3.8%. Even Wells Fargo yields about 2.5%, far above what banks pay on savings or checking accounts. These dividends from financial services companies, traditionally among the highest-paying sectors in the market, are attractive, so long as the payments are safe and the stocks can manage to be relatively stable. Analysts led by John Pancari at Evercore ISI on Tuesday noted, that as a group, banks offer relatively healthy balance sheets and their yields are at a higher-than-usual premium to the yield on the S & P 500. Q3 bank earnings playbook All eyes turn to bank earnings for clues on slowing U.S. economy after Dimon’s recession warning Treasury yields in some instances may be higher, but the “volatility of bank dividend yields have traditionally been far less than that of Treasuries,” Evercore ISI wrote. At the same time, in the current economic cycle, there’s less risk bank dividends will be cut because of “solid capital levels, forward looking reserve methodologies, and conservative capital management through the pandemic.” As a result, today’s above-average financial dividend yields “present an opportunity – particularly given banks’ still-solid earnings power (despite eventual credit normalization), robust capital levels, and historical dividend progression,” Evercore ISI said. — CNBC’s Michael Bloom contributed reporting.

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