If this year's weakness in most banking stocks has you wary of buying them, you may want to dial back your worry. The economic turbulence admittedly translates into challenges for the business. But most banks are far more resilient than they typically get credit for.
But if I were looking to make a true forever pick in the beaten-down banking sector right now, one name stands out from the rest. That's JPMorgan Chase (JPM 1.67%). Here's why.
The many facets of JPMorgan Chase
You've certainly heard of it. Not only is it the nation's biggest bank as measured by assets, it's also arguably one of the most-diversified banks in the business. From consumer to corporate banking and from retail to institutional investing, JPMorgan does it all.
More than that, though, JPMorgan does it right. No single operating unit accounts for more than half of its revenue or income, and its biggest division -- consumer and community banking -- primarily consists of its conventional banking and credit card business. Mortgage lending was never a key profit center for the company to turn into a liability in the wake of the mortgage market's current contraction. Rather, its core businesses are poised to stand up in the face of whatever weakness is brewing.
And this is no minor detail. This degree of diversity protects the big bank's above-average (and reliable) dividend. The stock's current yield of just above 3% is based on a trailing four-quarter total payout of $4. During this stretch, however, JPMorgan Chase has earned a total of more than twice that figure.
NYSE: JPM
Key Data Points
That dividend has also been raised every year since 2011. Now nearly halfway to becoming a Dividend Aristocrat, the bank is arguably apt to do whatever it takes to avoid restarting that clock.
Perhaps the most compelling reason to buy JPMorgan shares while they're still down 23% from last October's peak, however, is how it's melding the old with the new.
Case(s) in point: Just last week, the company launched its robo-advisor service, allowing investors to regularly connect online to implement a personalized financial plan. Also last week, JPMorgan unveiled a new venture capital arm focusing entirely on the biotech market. And just a few days ago, the bank completed its first live trade on a public blockchain. It's another step into a blockchain arena JPMorgan Chase believes will grow into a major profit center of its own.
Built to last
A perfect investment? No, there's no such thing. Any investment has some element of risk, and this one is no exception. As a reminder, this company's earnings and dividend stumbled in the wake of 2008's subprime mortgage meltdown, and last quarter's investment banking business bumped into a major headwind following 2021's banner year for the business.
Take a step back and look at the bigger, longer-term picture, though. This organization has several ways of making money in nearly any environment, and it's good at all of them.
Moreover, the sheer diversity of its revenue streams means even the harshest of economic conditions won't necessarily upend the company. It will instead keep the company afloat during the tough times so it can thrive again in the good times. In this vein, note that while JPMorgan's wealth management and commercial banking businesses aren't as big as its consumer and corporate business, they're both much more predictable revenue (and income) drivers.
Data source: JPMorgan Chase & Co. Chart by author. All figures are in millions.
Bottom line? You may take the occasional lump by holding it. If you're really looking for a financial stock to round out your forever portfolio, though, you can't go wrong with JPMorgan Chase.
Oh, and in case you're wondering, yes, waning demand for mortgage loans took a small toll on last quarter's total business. It was more than offset, though. Net interest revenue jumped 25% year over year, far outpacing the growth of its interest-related expenses. JPMorgan is reaping plenty of benefit from recent interest rate increases, subsequently surprising many investors who had seemingly forgotten how the banking business works. This profit dynamic isn't apt to change anytime soon, either.
