It's a good time to be an investor in U.S. banks. Two months or so after the latest round of the Federal Reserve's (Fed) bank stress tests -- in which 22 prominent lenders in the country were put through their paces to judge how they'd fare in adverse economic circumstances -- several have declared dividends recently (after all, every tested bank passed).
Two eager raisers from that pack are nationwide incumbent Bank of America (BAC 0.48%) and "super-regional" PNC Financial Services (PNC 1.25%). The good news for income investors and yield hunters is that there's enough time to buy shares in one of them to snag its raised payout. Here's a little more about each.
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1. Bank of America
Bank of America, one of the so-called "big four" U.S. lenders, pulled the lever on its latest dividend raise near the end of July. Going forward, the company will dispense a quarterly payout of $0.28 per share; this is $0.02, or 8%, higher than its predecessor.
In another stock-supporting move, the company launched a new stock repurchase program authorizing up to $40 billion in such buys. This replaced an existing initiative that had a bit over $9 billion left under authorization.
July was a busy month for Bank of America, as it also published its latest set of quarterly results. Not for the first time in recent quarters or years, the company managed to grow key fundamentals on a year-over-year basis, and beat the consensus analyst estimate for profitability (it missed on revenue, although not by much).
For the second quarter, revenue rose by 6% to a very sizable $10.8 billion. Net income saw a more modest advance but was still considerable, with a 3% improvement to $7.1 billion. Average deposits climbed at roughly the same rate, while average loans and leases increased 2%.
The U.S. economy, although bracing itself for the fallout of the latest string of tariffs announced by the Trump administration, continues to be robust. This means more loans, credit card spending, securities trading, and activity in other areas that produce revenue for a bank. Assuming the economy weathers the coming storms at least somewhat effectively, Bank of America should continue to thrive.
The company's dividend raise will take effect with the next distribution, scheduled for Sept. 26. Investors of record as of Sept. 5 are eligible for the payout. At the most recent closing share price, the enhanced amount would yield 2.5%.
2. PNC
Every large American bank operates differently. In contrast to Bank of America, PNC declared its dividend before unveiling second-quarter results in mid-July.
PNC is called a super-regional because compared to the big four, it has branches in "only" 27 states plus the District of Columbia. Even though it's not as mighty as that hallowed quartet, it's still a big operation, with nearly $560 billion in total assets at the end of its most recently reported quarter.
It's also a reliably steady dividend payer and lifter. Its latest quarterly dividend raise is a 6% bump to $1.70 which, in the words of its long-serving CEO Bill Demchak, "reflects our continued financial strength and our board's confidence in our strategy and outlook."
There's a drop of marketing/investor relations hyperbole in that, sure, but recent performance backs up the talk. PNC's second-quarter revenue rose at a healthy year-over-year pace of nearly 5% to nearly $5.7 billion, while headline net income zoomed 11% higher to exceed $1.6 billion. The growth of average loans and deposits was a bit sluggish (at around the 1% mark for each), but they did rise.
Similar to Bank of America, PNC is a prominent lender that has years of experience milking a healthy economy.
Analysts tracking the stock are collectively expecting growth higher than those second-quarter improvements in 2025 and next year.
Annual revenue should rise by over 6% in the former frame, and slightly below that rate in the latter. Growth in everyone's favorite metric, net profit, is forecast at a respective 13% and 12% on a per-share basis. This is a rather under-the-radar bank stock that feels like a solid bet now.
PNC's raised dividend is to be dispensed on Aug. 5 to stockholders of record as of July 15. It yields a theoretical 3.7%, which is quite generous for the financial sector.
