From Dividend Growth Stocks:
Before the 2008 financial meltdown, names like Bank of America (BAC), Citigroup (C), U.S. Bancorp (USB), and Wells Fargo & Company (WFC) were held in many dividend growth portfolios. And why not? They paid a good yield and grew their dividend on a regular basis. Now their yields range between 0.5% and 1.7%. There is a lesson to be learned here.
Investors should never over-allocate in one sector and certainty should never stop monitoring his investments. During the 2008-2009 time period, many banks were making questionable loans, while investment firms were creating and peddling exotic financial instruments. In effect, they were operating under an unsustainable model -- it was destined to come tumbling down, and did it ever.
The banks that were able to sustain their dividend during this dark period were usually small and locally managed. They were able to avoid the government's "help" and all the strings that came along with it.
Insurance companies are another prominent member of the Financial Services sector. They operate under the ultimate model. The companies charge premiums to protect you, invest the premiums, earn a return, and find ways to minimize what they actually pay you when a claim is filed. Finally, they will raise your rates for filing a claim.
This week, I screened my dividend growth stocks database for Financial Services companies with a yield above 3.5% and those that have increased their dividends for at least 10 consecutive years. The results are presented below...
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