Financial institutions have done well in their recent stress tests and that’s great news for dividend investors. One top bank stock, Wells Fargo & Company (NYSE:WFC) has even announced a dividend increase. On July 23, the bank announced that for its Sept. 1 dividend payment, its payout will rise by 5 cents to $0.40, representing a 14% increase from its previous quarterly payment.
With the increase, investors who buy shares of Wells Fargo can expect to earn a yield of 2.7%, based on a share price of around $60. That yield is more than twice as high as the S&P 500 average of 1.3%. To collect $1,000 in dividend income from Wells Fargo stock over the course of a year, you would need to invest approximately $38,000. That’s far lower than the more than $75,000 you’d have to invest if the payout were closer to the S&P 500 average.
Wells Fargo has been rebuilding its dividend since 2020, when it slashed its payout by 80% amid the pandemic, down to just 10 cents. It has quadrupled its payout since then. The new quarterly payment, however, is still a bit short of the $0.51 payments it was making back in early 2020.
Although there’s still some risk looming for the stock as investors remain worried about a possible recession, the bank is on much more solid footing than it was just a few years ago.
Year to date, shares of Wells Fargo are up 21%. And with a modest price-to-book multiple of 1.3, it can make for a good buy right now.
