3 Bank Stocks Raised Their Dividends 10% or More This Year and Pay Out Less Than 30% of Earnings

Dividend investors usually have to pick between a dividend that grows fast and one that is well covered by earnings. However, three of the biggest U.S. banks are offering both right now.

JPMorgan Chase (NYSE:JPM | JPM Price Prediction), Wells Fargo (NYSE:WFC) and Goldman Sachs (NYSE:GS) each raised their quarterly payouts by double digits this year, and none of them pays out more than 29.6% of third-quarter earnings per share. That leaves most of each bank’s profit in reserve to fund buybacks, absorb losses on bad loans and pay for the next raise.

For a bank, earnings and regulatory capital do the job that free cash flow does at an industrial company, so coverage and capital buffers are the safety checks that count for income investors.

JPMorgan Chase: A Bigger Check Backed by Excess Capital

JPMorgan raised its quarterly dividend to $1.65 per share from $1.50, a 10% increase. That works out to an annualized $6.60 per share. At a share price around $338.87 on Tuesday, Oct. 20, the yield comes to about 1.97%. That is a growth-focused yield, so the income case here rests on how quickly the payout grows and how secure it is.

Coverage is strong. The new $1.65 quarterly dividend matches 29.6% of third-quarter EPS of $5.57. The bank earned $15.3 billion in net income for the quarter and ended it with a standardized CET1 ratio of 13.9%. The chief executive estimated excess capital at roughly $30 billion, adding, “that’s plenty.”

The dividend record supports that confidence. The quarterly payout was 44 cents in early 2016. In 2025 it went from $1.25 to $1.40 and then to $1.50, and this year’s increase makes three raises in under two years. Management also put the dividend first in its capital priorities, calling the payout as the commitment that comes “after you pay your dividend, which hopefully will be steady.”

Buybacks are still running, though they have slowed. JPMorgan’s net share repurchases came to $664 million in the third quarter, compared with total repurchases of $6.703 billion in the second quarter. The bank said it reduced share repurchases this quarter because it is putting that capital into lending and growth initiatives where it expects high returns. For dividend holders, that means the money is going into earnings growth that should support future raises. The board also authorized a new $50 billion repurchase program, so buybacks can pick up again when lending opportunities slow.

Bull case: The optimistic thesis is straightforward. The largest U.S. bank is valued at roughly 14x trailing earnings, keeps more than 70% of its profit after paying the dividend, and has room in its capital base to keep raising the payout.

Risk to keep in mind: Current earnings are being helped by unusually good conditions. The chief executive said a 17% return on tangible common equity is the through-cycle goal, compared with 20% last quarter, and noted “times are pretty good now with high volume and high asset prices and fairly low credit losses.” The quarter was also a rare profit miss. If returns fall back to normal levels, the payout ratio will rise even if the dividend remains flat.

Wells Fargo: Lowest Payout Ratio and the Highest Yield of the Three

Wells Fargo raised its quarterly dividend to 50 cents per share from 45 cents, an 11% increase. That works out to $2 a year. With the shares around $82.33 on Oct. 20, the yield is about 2.47%, the highest of the three stocks on today’s list. Part of the reason is price: WFC is only up 4.11% year to date, so new buyers get more income per dollar invested.

Coverage is the strongest in this group. The 50-cent dividend matches 26.7% of third-quarter EPS of $1.87, and EPS rose 13% from a year earlier. Credit quality held up, with net loan charge-offs at 38 basis points of average loans. The finance chief said there are “no signs of broad-based credit deterioration.” He also said quarterly earnings power of about $6 billion, after dividends, adds roughly 30 basis points to CET1 each quarter. In plain terms, the dividend is paid from earnings and still leaves capital to spare.

Income investors should know the full history. Wells Fargo cut its quarterly dividend from 51 cents to 10 cents in 2020. It has rebuilt the payout steadily since then, through 20 cents, 30 cents and 40 cents to today’s 50 cents. That puts the dividend almost back to where it was before the cut.

Buybacks are larger here than at JPMorgan. Wells Fargo bought back $2.5 billion of stock in the third quarter, after about $7 billion in the first half. A shrinking share count means each remaining share gets a bigger piece of earnings, which supports future dividend growth.

Bull case: The optimistic thesis centers on returns. Third-quarter ROTCE was 16.3%, and the chief executive said it “continues to increase and is getting closer to our 17% to 18% target.” Proposed Basel III changes could cut risk-weighted assets by about 7%, which would free up capital. The stock is valued at roughly 12 times trailing earnings, the lowest multiple of the three.

Risk to keep in mind: Wells Fargo has the smallest capital cushion of the three bank stocks on this list. Its CET1 ratio was 10%, at the bottom of its 10% to 10.5% target range, against a regulatory minimum plus buffers of 8.5%. Buybacks would be the first thing cut if capital tightens. The dividend would come after that.

Goldman Sachs: Two Raises This Year and a Dividend Ahead of Its Peers

Goldman is classified as a capital markets company rather than a diversified bank, but its dividend math looks a lot like the other two. The quarterly dividend rose to $5.00 from $4.50, an 11% increase, for an annualized $20.00 per share. With the shares around $880.71 on Oct. 20, the yield is about 2.28%. The stock fell 8.2% over the past month, which drove the yield higher.

This is actually Goldman’s second raise of the year. The payout went from $4 to $4.50 earlier this year before the latest increase. The finance chief calling the trend directly: “It’s obviously up 25% year over year. It’s now $5 a share. It was $4 a year ago. Five years ago, it was $2 a share.”

Coverage is solid even on a quarter that included one-time costs. The $5 dividend matches 29.4% of Q3 EPS of $17.01. That EPS figure already includes a charitable contribution that cut earnings by about $1 per share. Goldman ended the quarter with a CET1 ratio of 12.4% against a 11.4% requirement, and year-to-date return on tangible equity reached 22.4%.

Buybacks are larger than the dividend. Goldman bought back $3 billion of stock in the third quarter and paid $1.5 billion in dividends. Management places dividend growth just behind investing in the business: “We do expect to continue to invest in the sustainable growth of our dividend.”

Bull case: Goldman’s earnings are becoming more stable. The chief executive said the firm’s more durable revenue now makes up “approximately 45% of revenues for the year to date,” and assets under supervision reached $4.1 trillion. Those recurring fees help support the dividend in years when deal-making slows.

Risk to keep in mind: The rest of Goldman’s earnings still depend heavily on trading and deal activity. The investment banking backlog decreased from the prior quarter, and the stock’s beta of 1.284 is the highest of the three. A slowdown in capital markets would hit Goldman’s EPS harder than the others, which would drove its payout ratio up quickest.

Why These 3 Dividends Fit Together

JPMorgan, Wells Fargo and Goldman each raised their dividends by 10% or more while paying out less than 30% of quarterly earnings, and each kept buying back stock at the same time. Wells Fargo has the highest yield and the lowest payout ratio. JPMorgan has the most excess capital. Goldman has grown its dividend the quickest. All three pay their dividends first and have plenty of earnings left over, which is why their payouts can keep growing through an economic slowdown.

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