This Top Financial Dividend Stock Puts Big Banks To Shame

Jeff Reeves, Senior Investment Analyst
Updated: December 2, 2022

I visited Florida a few months back, and witnessed a rather hilarious scene — a gaggle of teenagers, stamping out of the water as they shrieked about sharks in the water.

It was hilarious, of course, because there weren’t any sharks. What had terrified them was actually just a curious manatee.

It’s easy to understand why those kids freaked out. Sharks are terrifying to most people. The group spotted a dark shape in the surf and instantly panicked rather than take their chances.

But guess what: Swimmers very rarely encounter sharks. In a typical year, there are only about 10 humans killed by sharks… and about 100 run-ins with sharks in total.

Now, I’m all for acting responsibly. I’m sure those 10 unlucky people wish they were a bit more cautious – and believe it or not, I’ve actually seen a real-life shark in the water on previous trips. But avoiding the ocean entirely or running away screaming at the first sign of sea creatures is no way to live your life.

Instead, it’s much better to stay calm and think rationally. That way you can enjoy things when the sun is shining, but still be prepared if threats do arise.

Now is the Time to Bank on Financial Dividend Stocks

Success in so many areas of life depends on keeping a cool head, and looking beyond your emotions. Running off blindly at the first sign of shadows is sometimes as dangerous as being oblivious to the risks.

In short, it pays to stop and think.

Over the last decade or so, I’ve been flabbergasted at the number of investors who have reduced their exposure to financial stocks – or in some cases, written them off entirely.

Yes, I know all about Lehman and Bear Stearns and AIG. I lived through the disaster of 2008 alongside everyone else. But I also have relied on the return of generous dividend practices over the last decade that have made financials once again the go-to sector for income investors.

To be clear, you can’t just throw your money around at any old bank. There are clearly some shops that are better run than others, and the trick is to focus on a solid company that will succeed regardless of whether we’re generally seeing a bull or a bear market.

One of my favorite such picks right now is Prudential Financial, Inc. (PRU). This roughly $40 billion player yields 4.5% as I write, and is a great example of what to look for – regardless whether you’re a bull or bear.

Shares have outperformed the S&P 500 handily this year, and are poised for another strong year as we enter 2023.

Here’s why I like Prudential so much:

  • It’s diversified, with about 45% of earnings coming from its U.S. businesses that are best known among consumers for retirement and life insurance offerings. The rest comes from a small but lucrative investment management arm or international operations that include a leading market share in Japan and expanding footprints in emerging markets.
  • It’s “liquid” with ready access to available assets of more than $5 billion as of its November earnings report. This will keep it stable, as well as allow PRU to fund strategic acquisitions if it finds a juicy target.
  • It’s frugal, recently announcing that a multi-year strategic restructuring realized $750 million of cost savings a full year ahead of target. That shows shrewd and responsible management committed to long-term shareholder value.

PRU isn’t making risky proprietary trades or dependent on “risk on” financing like IPO deals. Instead, it’s a slow-and-steady dividend stock.

Here’s something else: Over the past 10 years, PRU has raised its quarterly payout from $0.40 to $1.20 – an impressive 200% increase.

And with earnings that are more than 2X that dividend, it’s all but certain the payouts will only grow more in the years ahead.

Don’t Let Emotion Chase You From Long-Term Success

Right now, the market is at an inflection point. Some investors are drooling at the rebound since the market’s October lows and eager to dive back into aggressive tech and biotech stocks. Others are biting their nails, waiting for the bottom to drop out again.

Both approaches are dead wrong. Because they rely on a short-sighted, emotion-driven approach to investing rather than a quantitative analysis of the facts at hand.

The truth is there is always opportunity in the market, and there are always risks. The only folks who need to worry about the tug-of-war between bears and bulls are the simpletons who have 100% of their portfolio in one or two index funds.

That’s not how we do things here at Contrarian Outlook.

Our analysis prioritizes uncorrelated returns – profits and income that roll in no matter what the market’s doing. Personally, I think a recession is indeed in the cards for 2023… but that only makes a focus on resilience and durable returns even more important.

Prudential is a great example of a stock that has a lot to offer regardless of whether the market is broadly going up or down.

But unfortunately, you need more than just one stock to build a winning portfolio.

Fortunately, we have an entire Buy List of “recession-resistant” dividend stocks in our Hidden Yields portfolio. These solid companies offer reliable dividends and solid share prices that will gradually –but significantly—deliver 15%+ annualized gains over the next decade.

And that forecast is conservative, based on the chance of continued trouble in the near-term. If things go well, these picks could break out.

Click here for our full list of “Bull or Bear” dividend payers, as well as their tickers, current yields and all of our in-depth research.