BAC vs. USB: Which Bank Stock Offers the Superior Dividend Income for Retirees?
Two major bank stocks both raised dividends this summer, but their income profiles for retirees tell very different stories about yield, safety, and what happens when interest rates fall.
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Retirement-focused investors collecting income right now may be choosing between Bank of America (NYSE:BAC | BAC Price Prediction) or U.S. Bancorp (NYSE:USB). Both banks reported second-quarter results and raised dividends this summer. Bank of America closed at $53.78, down 13.7% over the past month. U.S. Bancorp finished at $57.51, down 7.52% over the same period.
Yield and Dividend Record: USB Pays More and Has Paid Longer
U.S. Bancorp’s forward annualized dividend of $2.16 works out to a yield of roughly 3.8%. Bank of America’s forward payout of $1.28 yields about 2.4%.
Bank of America’s quarterly payout rose to $0.32 from $0.28, an increase of about 14%. U.S. Bancorp’s went to $0.54 from $0.52, roughly 4%. Over the longer run, U.S. Bancorp has the better record. Bank of America cut its dividend from $0.64 in 2008 and paid $0.01 a quarter from 2009 through 2013. U.S. Bancorp was paying $0.125 in 2011 and has raised the payout in every period since then, 2020 included. Winner: USB.
Payout Safety: Bank of America Has the Bigger Capital Cushion
Regulators set bank dividend limits through annual stress tests. The Federal Reserve estimates how much capital each large bank would lose in a severe recession, setting a buffer above the regulatory minimum before cash can return to shareholders. The key measure is the common equity Tier 1 (CET1) ratio. U.S. Bancorp’s latest raise was announced following 2026 CCAR results, the Fed’s stress-test review.
Bank of America’s new quarterly dividend is about 26% of its $1.21 second-quarter EPS. U.S. Bancorp’s is 40% of its $1.35. Bank of America’s CET1 ratio of 11.2% stands well ahead of its 10% minimum ratio. U.S. Bancorp reported 10.8%, or 9.4% including AOCI. Bank of America repurchased $6.0B of stock last quarter. U.S. Bancorp bought back $200M while on the last lap of capital build. Winner: BAC.
Earnings Durability: USB’s Fee Mix Holds Up Better When Rates Fall
If rates fell 100 basis points below the forward curve, Bank of America’s net interest income would drop by about $2.2 billion over 12 months. Net interest income made up about 51% of quarterly revenue. Global Markets revenue jumped 34% and investment banking fees rose 50%, both linked to market activity.
Fees made up 44% of U.S. Bancorp’s revenue. They are spread across payments, trust, capital markets and consumer fees, which CEO Gunjan Kedia calls a “four-legged stool.” Its net interest margin expanded to 2.79% from 2.66%, and management sees a path toward a 3% margin. The net charge-off ratio improved to 0.53%. Winner: USB.
Verdict: U.S. Bancorp Is the Better Retirement Income Stock
U.S. Bancorp wins two of three rounds. Its 3.8% yield pays far more income than Bank of America’s 2.4%. The dividend is covered at 40% of earnings, credit quality is improving and the payout has grown since 2011. Shares gained 24.63% over 12 months versus Bank of America’s 8.76%.
Bank of America’s profile tends toward dividend growth over current income. It pays out a small share of earnings, holds more capital and buys back billions quarterly. For someone living on dividends today, U.S. Bancorp offers the stronger current income profile.
This call could change if U.S. Bancorp’s CET1 ratio falls below its roughly 10% target, or if a stress test blocks future raises. Watch whether buybacks actually increase as management has promised, and keep an eye on office real estate, where the bank’s nonperforming loans are concentrated.
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Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
