Assessing the Quality of Bank Dividends
Dividends can provide essential tax-advantaged cash flows to investors’ portfolios for the purpose of opportunistic tactical reinvestment and periodic income distributions. Banks are currently priced at relatively low levels and, as a result, boast relatively high dividend yields.
The low stock prices aren’t necessarily without justification; the banking sector has encountered substantial challenges recently, between ultra-low interest rates and stress test requirements implemented by the Federal Reserve.
However, for those banks with strong balance sheets and sound operations that provide the ability to maintain dividend payments and successfully navigate economic challenges, the current environment may present an opportunity for an advantageous mid- to long-term investment with strong dividend cash flows in the interim holding period.
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- Anthony Winkels is Managing Partner and Wealth Advisor at Fortis Wealth Management
