Investing

Interest Rates to Rise in 2022 and 2023: 5 Big Dividend Paying Banks to Buy Now

Federal Reserve Chair Jay Powell finally has decided to get tough with inflation. After years of zero interest rates, and constant stimulus, things are going to change. The market is now expecting three interest rate hikes in both 2022 and 2023 and an increase in the quantitative easing tapering to $30 billion per month, and that number could also be headed higher soon. After painting itself into a corner, the Federal Reserve is forced to fight its way out now.

One industry that loves rising interest rates is banking, as interest rates and bank profitability are connected. When interest rates are higher, banks make more money, by taking advantage of the difference between the interest banks pay to customers and the interest the bank can earn by investing. In addition, higher interest rates mean banks can charge more in their loan portfolios.

We screened our 24/7 Wall St. research database looking for banks stocks rated Buy that also pay the highest solid and dependable dividends. When you combine the positives of rising interest rates, continued reopening growth, the banking industry could be poised for some outsized total return, especially after lagging badly in 2021. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Citigroup

This top bank has rallied off its lows but looks poised to move higher in 2022. Citigroup Inc. (NYSE: C) is a leading global diversified financial service company that provides consumers, corporations, governments a broad range of financial products and services.

Citigroup offers services such as consumer banking and credit, corporate and investment banking, securities brokerage, transaction services and wealth management. It operates and does business in more than 160 countries and jurisdictions in North America, Latin America, Asia and elsewhere.

Trading at a still very cheap 7.7 times estimated 2022 earnings, this company looks very reasonable in what remains a volatile stock market and in a sector that has lagged dramatically.

Investors receive a 3.39% dividend. D.A. Davidson has an $84 price target, while the consensus target is $82.81. Citigroup stock closed trading on Thursday at $61.07 a share.