The financials sector comprises companies offering financial products and services to consumers, businesses, and governments. Companies in the sector provide investment services, lending, capital risk management, and facilitate capital flow, among many other things. A shortlist of industries within the sector covers banking services, insurance, asset management, capital markets, and fintech companies.

Many dividend investors covet select financials stocks due to the sector's long-term stability that is powered by economic growth. Insurers and banks are popular income investments due to predictable cash flows and high regulatory capital requirements that can act as significant barriers to entry.

Companies in our financials stocks list include stocks traded on the NYSE or NASDAQ exchanges, many of which are also S&P 500 constituents with several securing the coveted dividend aristocrat moniker.

Using our lists to find financials dividend stocks

Our customizable stock lists simplify finding the best financials stocks for your portfolio by allowing you to search for companies based on whether they pay dividends or not. You can also compare key financial sector metrics, such as price-to-earnings (P/E) and price-to-book-value (P/B) ratios, for valuation purposes, as well as dividend yield, payout ratios, and return on equity (ROE).

Our stock comparison tool can also be useful for comparing essential stats for a hand-picked selection of financial services stocks.

Industries

The financials sector is a cornerstone of the global economy, offering a wide array of financial products and services. The sector comprises a long list of industries, including traditional banking, insurance, wealth management, payment processing, and financial technology, each playing a critical role in global financial systems.

• Asset management: Companies that manage investment funds, mutual funds, and portfolios for individuals, institutions, and high-net-worth clients.
• Regional banks: Smaller and mid-sized banks that provide consumer and business banking services primarily within specific geographic regions.
• Diversified banks: Large, multinational banks that offer a broad range of financial services, including commercial banking, investment banking, wealth management, and insurance.
• Capital markets: Firms that facilitate the buying, selling, and issuing of financial securities, including investment banks, brokerage firms, and trading platforms.
• Financial - conglomerates: Large financial corporations that operate across multiple financial industries, such as banking, insurance, and asset management.
• Financial - credit services: Companies that provide consumer and business credit solutions, including credit card issuers, personal and business loans, and credit reporting agencies.
• Financial - data and stock exchanges: Firms that operate financial markets, provide trading infrastructure, and deliver financial data services.
• Financial - mortgages: Companies specializing in originating, servicing, and securitizing home loans and commercial real estate mortgages.
• Insurance - brokers: Intermediaries that sell and negotiate insurance policies on behalf of clients, connecting them with insurance providers.
• Insurance - diversified: Large insurance firms offering a wide range of insurance products, including life, health, property, casualty, and specialty coverage.
• Insurance - life: Companies that provide life insurance, annuities, and long-term financial protection for individuals and families.
• Insurance - property and casualty: Firms that offer home, auto, commercial, and liability insurance, protecting against damage, accidents, and lawsuits.
• Insurance - reinsurance: Companies that insure insurance providers, helping them manage risk by covering large-scale claims and catastrophic losses.
• Insurance - specialty: Insurers focusing on niche markets, such as cyber insurance, travel insurance, or high-risk business sectors.
• Investment banking and investment services: Firms that advise on mergers, acquisitions, IPOs, and capital raising while also providing asset management and brokerage services.
• Shell companies: Corporations that exist primarily for financial transactions, mergers, or IPOs without significant business operations.

How to invest in financials stocks

Pros of the sector

• Stable and growing dividends
• Profits tied closely to economic growth
• Attractive valuations due to long-term stability

Cons of the sector

• Highly cyclical and sensitive to recessions
• Regulatory and political risks
• Heightened exposure to consumer and corporate credit and default risk

There are two primary ways investors gain exposure to financials stocks: individual stock ownership and financials ETFs. Let’s first focus on several key areas when analyzing individual companies.

Ratios and fundamentals

Unlike other sectors, traditional metrics like free cash flow (FCF) aren’t often relevant, requiring investors sometimes to review industry-specific metrics to assess profitability, risk, and dividend sustainability.

Metrics like P/B, price-to-tangible-book-value (P/TBV), and net interest margin (NIM) offer better insights specific to bank valuation trends and profitability.

The combined ratio is commonly used to analyze insurance underwriting profitability, with a ratio below 100% meaning the business’s core business is profitable.

Asset management and investment firms can also be viewed through the lens of assets under management (AUM) growth since many firms predominantly generate fees on managed assets.

A common thread unifying these industries is that most can be effectively analyzed using P/E for valuation and ROE for capital efficiency. However, both will have unique ranges based on the specific financials industry.

Popular financials dividend stocks

Some of the most popular financials dividend stocks include well-known brands and unknowns as well, such as Chubb Ltd. (CB), JPMorgan Chase & Co. (JPM), Visa Inc. (V), and Blackrock, Inc. (BLK).

Many of the highest-yielding financials stocks are business development companies (BDCs), which can offer dividend yields in the high single to low double digits. Ares Capital Corporation (ARCC) is one such popular BDC.

These companies primarily offer small and medium-sized business financing and must distribute at least 90% of taxable income as dividends, like REITs.

Popular financials ETFs

A handful of the largest financials sector ETFs include the Financial Select Sector SPDR Fund (XLF), Vanguard Financials ETF (VFH), iShares US Financials ETF (IYF), and Fidelity MSCI Financials Index ETF (FNCL).