Five Financial Companies Expected To Hike Dividend This Year

The financial industry was hit harder than any other in the massive economic downturn of 2008 and 2009. The global recovery has been tepid, but the economic environment has certainly improved a lot from a couple years ago. From a dividend standpoint, however, financial services is still lagging. Five years ago, the financial sector was one of the highest dividend-yielding sectors in the market. In 2010, very few financial companies even paid a dividend of any kind. The amazing drop in dividend payouts over a short period of time proved just how quickly a dividend can be dropped when a company doesn't have a strong balance sheet. Many large banks and other financial institutions have spent the last year or two trying to focus on building up the bottom line. There are fewer risky assets on the books than there were a few short years ago, and debt is not being used nearly as aggressively. As these companies become more confident in their ability to withstand economic hardships, they are starting to return some more of their profits to shareholders. Let's take a look at a few companies that you can expect to increase their dividend payout in 2011. Five Financials Expected to Hike Dividend in 2011 1. Goldman Sachs (NYSE:GS) - The company didn't get through the credit crisis unscathed, but it was one of the few investment banks that didn't merge with a major money center bank. Goldman Sachs is expected to earn $14.60 per share in 2011, so the company is still highly profitable. The stock currently yields just one percent, and I think that is likely to rise in the near future. The dividend payout ratio of just 15 percent means the balance sheet should support a healthy raise in 2011. 2. Chubb (NYSE:CB) This property and casualty insurance giant has raised its dividend for an amazing 45 consecutive years, and I see no reason to believe the streak will stop in 2011. Chubb currently yields 2.4 percent annually. Despite this fairly high dividend, the payout ratio at the company is only 21 percent. Chubb has $7.24 per share in cash on its balance sheet, so this company should have no problem hiking its dividend payout again this year. 3. Visa (NYSE:V) Visa set an impressive standard by starting a dividend payout in its first year as a publicly-traded company in 2008. Analysts continue to raise estimates for this financial services standout. The ability of this company to generate industry-leading profit margins has been impressive to say the least.  The ultra-low dividend payout ratio of 11 percent tells me that Visa's current dividend yield of 0.75 percent should rise in 2011. 4. SunTrust Banks (NYSE:STI) SunTrust doesn't get quite as much publicity as some of the other money center banks, but this is a company with a market capitalization of $14.38 billion. The company was paying 77 cents per share in 2008, but they dropped their dividend to a penny after the credit crisis. Most of their competitors have taken the step of boosting the dividend already in 2010 or 2011, but SunTrust has been a little slow to do so. As the company returns to consistent profitability, I expect a dividend hike later this year. 5. US Bancorp (NYSE:USB) US Bancorp already raised its dividend to 1.94 percent in March 2011, but I think a further increase is likely. This is a company that has gotten its act together more quickly than the average bank. The average analyst price target for USB is 18 percent higher than it finished on May 19. The current payout ratio of 14 percent gives this company plenty of room to return more cash to shareholders. US Bancorp has shown in the past that they like to pad the pockets of their shareholders, and I expect them to prove that once again in the quarters ahead.  ... Read more