The best bank stocks to buy in 2021
The banking sector is constantly evolving, especially with online banking services and new fintech solutions. One thing that doesn’t change? Banking is an essential service that is not going anywhere anytime soon. As a result, bank stocks can offer stable returns to investors.
This is a good thing for investors who are looking for a reliable industry that can help them grow their wealth for the long term. And savings accounts aren’t the only way to do it: many banks are publicly traded and may earn your investment dollars.
Best bank stocks to buy
Here are the best bank stocks to buy in 2021:
- JPMorgan Chase (NYSE: JPM)
- Bank of America (NYSE: BAC)
- Wells fargo (NYSE: WFC)
- Citigroup (NYSE: C)
- US Bancorp (NYSE: USB)
Chances are, if you live in the United States, you’ve heard of all of these banks. There’s a good reason for this, because all of them are successful (and lucrative) organizations. As a result, all of them are worth investing in or, at the very least, adding to your watchlist. They are all strong banks with a national presence, which makes them beneficial investments for just about anyone. And if you’re looking for smaller stocks, consider these top 5 small-cap fintech stocks as well.
JPMorgan Chase is a massive and incredibly lucrative multinational bank. With assets of over $ 3 trillion and revenues well over $ 100 billion, it is the country’s largest bank. The bank operates in more than 100 markets around the world and has more than 250,000 employees. It offers services in almost all sectors of the banking sector, both in commercial banking and in investment banking. In addition, its auto loan and credit card business has grown in recent years and offers some of the most attractive credit cards in the industry. This easily makes them one of the best bank stocks to consider buying.
Bank of America
Bank of America is headquartered in Charlotte, North Carolina, and is a multinational investment bank and financial services holding company. Behind JPMorgan Chase, it is the second largest bank in the United States. Its net turnover is down slightly in 2020 compared to 2019 but still remains at just over $ 85 billion. The same goes for its earnings per share, which was $ 1.88 for common shares. It should be noted that these two numbers saw similar increases in 2019 compared to 2018, so the economic slowdown may be a factor. Despite these declines, it has seen an improvement in its total assets, which have grown significantly from $ 2.4 trillion in 2019 to $ 2.8 trillion in 2020.
The third of the bank stocks on the list is Wells Fargo, which is also the third largest bank in the United States. Wells Fargo is based in San Francisco, California. Despite a recent decision to close all personal lines of credit, the bank continues to grow. He says he wants to focus his efforts on credit cards and personal loans. Its share price has risen by over 79% in the past year, which is by far the highest on this list. Wells Fargo offers services in a number of areas, including community banking, student loans, equipment lending, and retirement.
Citigroup operates the chain of banks that consumers know as Citibank. It is the fourth largest bank in the United States. It is headquartered in New York and offers a number of banking services, including investment and retail banking. Citigroup operates in more than 160 countries and has more than 200,000 employees. Its turnover is down in 2020, but its operating income and net assets are up. It also has the lowest PE ratio of any of the banks mentioned here, which may help explain why it’s the only bank on this list with a “strong buy” rating, according to TipRanks.
US Bancorp operates banks known to consumers as US Bank. The company is based in Minneapolis, Minnesota, and is the fifth largest bank in the United States. With total assets of nearly $ 500 billion, it provides services such as loan and deposit services, investment management and foreign exchange. It provides several other services, including credit cards and brokerage services. Its share price has also risen sharply this year, rising almost 70%. Only Citigroup saw a larger increase in its share price.
Bank stocks during inflation
Inflation is there, with prices rising 5.4% in June 2020 year over year. During such periods, bank stocks can be an effective hedge against inflation. And, indeed, bank stocks have risen over the past year, as have small cap stocks.
Remember how these big banks make their money: from services like loans and credit cards. Right now we are seeing modest inflation as people feel they can venture out again and spend the money. Thus, banks are also making money and their stock prices are skyrocketing.
However, there is a limit to this trend. If inflation gets out of hand or if we fall back into a recession, bank stocks will not fare well. During recessions, people cut back on their spending. During these times, the best stocks are those that are unaffected by inflation, such as utilities. For example, check out these water stocks.
So, for now, bank stocks are a good investment, but it depends on whether inflation does not get out of hand.
Dividends on bank shares
Most of the big banks pay dividends; in fact, every bank on this list pays a dividend. Dividends are issued quarterly on a per share basis and provide certain shareholders with some income while they own their shares. Annual dividends are typically around 1% to 3% of the share price. So, you are not going to get rich just with dividends, but they can provide a nice extra bonus.
It should be noted that dividend payouts can vary widely. For example, JPMorgan’s dividends have increased every year since 2010. At the time, it was only paying 20 cents for the entire year. Fast forward to 2020, and he paid out $ 3.60 in dividends for an 1800% increase. In 2021, the bank issued dividends three times of 90 cents each for a total of $ 2.70 per share. So, he will pay $ 3.60 per share again in 2021 if his fourth dividend payment is also 90 cents.
These stocks of large banks present good investment opportunities. However, their size limits their upside potential. To discover better opportunities for growth and income, consider signing up for Rich retirement. This is a free email newsletter full of investment tips and tricks.
About Bob Haegele
Bob Haegele is a personal finance writer who specializes in investing and retirement planning. His heavy student loan burden inspired him to pay off his loans, and now he’s helping others get their finances in order. When he’s not writing he enjoys travel and live music.