My goal is to teach everyday investors about building wealth, so they won’t to need to work to traditional retirement age. I want to help you take control of your life, have F.I.R.E.
And I want to help you do that by investing in stocks that pay dividends.
If you’re reading this then you probably have a bank account. And you likely use your bank to invest, save, or simply deposit your money. Growing up many of us were taught to save. But as you grow older you quickly learn that saving money won’t allow you to retire early, although having an emergency fund is important.
For this, you need to invest or start some kind of business. Or maybe you joined the military at 18 years old, successfully completed 21 years, and retired (like me). But even then, most military retirees go right back to work for another 20+ years because they chose to play it safe and not invest.
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They may have saved during their career but we know that’s not going to allow you to retire early. Many people are programmed to think that they have to work for most of their lives.
Work, pay bills, and die! Not me!
If you have a checking or savings account, then your bank is robbing you by paying you a low interest rate. Moreover, the way banks work, they were designed to take your money, not give you (money).
Let’s say you deposit $10,000. The bank then turns around and lends most of that $10,000 out to someone else at a significantly higher interest rate, all while paying you a measly 0.2% - 0.5%. When you think about, it’s actually a genius business model for the bank.
Sure, you can open a high yield savings account or CD and collect 4% to 5% in interest. But the average return for a savings/checking account is less than 1%, normally around 0.2% - 0.5% depending on your bank.
Bank stocks generally aren’t very popular with investors and you don’t often hear about them. Many investors are likely hesitant to invest in them as they are very cyclical and (many investors) remain cautious as a result of what happened during the Great Financial Crisis in 2008.
As a result, this makes them riskier investments. But if you think about it investing is risky.
Life is risky!
But you know what’s even more risky?
Getting the ticket at the end of the day for not taking any risk!
The Federal Reserve recently put large U.S. banks through a stress test to see how they could handle economic volatility. They don’t want what occurred during the GFC to happen again.
The top banks passed with flying colors. But what I wanted to share is that most announced dividend increases shortly afterwards. And although banks are viewed as risky, it’s safe to say the top U.S. banks aren’t going anywhere anytime soon.
If the largest U.S. banks fail, the U.S. economy fails. And the powers that be won’t let that happen. That’s why they all received bail outs during the recession of 2008.
Who will lend money to businesses to stimulate and grow the economy? If Walmart (WMT) or Costco (COST) need a loan for say $100 million, who do you think has that kind of money to give them? The largest banks. Most of these have billions and trillions in assets.
Additionally, most have been around since the 1700’s & 1800’s. So, as I mentioned previously, they aren’t going anywhere. Some may remember the Silicon Valley Bank run in early 2023. While this can happen, Silicon Valley Bank was small in comparison.
Below are the top 7 U.S. largest banks by assets and their recent announced dividend increases:
JPMorgan (JPM): Founded 1799. Assets: $4.358 trillion. Latest dividend increase 7% to $1.50.
Bank of America (BAC): Founded 1784. Assets: $3.3 trillion. Latest dividend increase 8% to $0.28.
Citigroup (C): Founded 1812. Assets: $2.5 trillion. Latest dividend increase 7% to $0.60.
Wells Fargo & Company (WFC): Founded 1852. Assets: $1.95 trillion. Latest dividend increase 12.5% to $0.45.
Goldman Sachs (GS): Founded 1869. Assets: $1.8 trillion. Latest dividend increase 33% to $4.00.
Morgan Stanley (MS): Founded 1924. Assets: $1.3 trillion. Latest dividend increase 8% to $1.00.
U.S. Bancorp (USB): Founded 1863. Assets: $676 billion. Latest dividend increase 4% to $0.52.
With the exception of U.S. Bancorp, all the top U.S. banks have more than a trillion in assets. And while banks pay you pennies for holding your money, most of them pay dividends.
Imagine having 500 shares of Goldman Sachs? That’s $2,000 a quarter or $8,000 annually from one stock! So the question I ask is:
Why are you so quick to deposit your money into the bank for them to loan it out and collect a high single-digit to double-digit interest rate while paying you less than 1%?
Yes, having a checking account is very important, but you can also collect dividends from top U.S. bank stocks that are essential to the economy.
So, just consider for a moment where you would be if you invested for over 20 years as a shareholder instead of losing money to inflation in a savings account. That’s how you laugh all the way to the bank.
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