USB hubs should be simple devices, but apparently it’s not possible to make One Port to Rule Them All without things getting a little messy. We have a full explainer here, but if you just want to get the basics before you buy your hub, here are a few things to keep in mind.
Ports speeds matter; version numbers don’t. It’s tempting to look at a USB 3.2 label and assume it’s faster than USB 3.0, but unfortunately, that’s not the case. In fact, many manufacturers have started defaulting to writing the speed of individual ports directly onto the device itself, rather than relying on version numbers on spec sheets.
Use Thunderbolt for your most data-hungry devices. Thunderbolt is a beefed-up version of USB, developed by Intel and Apple, that uses the same USB-C port you’re familiar with. These can carry huge amounts of data (up to 40 Gbps for Thunderbolt 3 and 4), which makes them ideal for things like SSDs, 4K and 8K displays, or monitors with ultrahigh frame rates for gaming. We’re now up to Thunderbolt 5, which is slowly making its way into some laptops. (Make sure your laptop port supports Thunderbolt.)
Don’t forget the power. Most USB hubs will draw electricity directly from your laptop to power any devices connected to it, but they obviously need to take up a port to do so. However, some hubs support USB Power Delivery (or USB-PD, sometimes marketed as “passthrough charging”) which allows you to plug a charger into one of the ports on the hub so you can keep charging your laptop while you plug in all your extra gadgets.
There are so many cables out there, and plenty of solid options did not make the cut. Here are a few I’ve tested and liked.
Photograph: Simon Hill
Twelve South PowerCord for $30: While I don’t think we want to go back to permanently attached cables and power adapters, they offer a simplicity that could be useful for some folks or situations. The PowerCord from Twelve South is thick and durable-feeling, with a tangle-resistant woven (4- or 10-foot) USB-C cable attached to a compact 30-watt (Power Delivery) wall plug.
EcoFlow Rapid Pro for $21: Kept out of a place above by Anker’s cables, this durable charging cable from EcoFlow is a solid choice if you want fast charging, since it can supply 240 watts. It also has tough metal ends, a lovely woven finish, and comes with a cable tie.
Nomad Chargekey for $29 and USB-C Cable for $25: The Chargekey is a handy wee addition to your keyring with 12 cm of braided cable capable of delivering 240 watts and up to 10 Gbps data transfer, though it can be a little awkward to use. I also tried Nomad’s new Kevlar-reinforced USB-C cable, which is also 240 W but only has 480 Mbps data transfer. It feels durable with metal ends and braided cable, but you can get more capable cables for less.
QDOS PowerMotion Ultra for £40: This USB 4.0 cable is a solid alternative to our top picks for folks in the UK, combining up to 240-watt charging with data transfer speeds up to 40 Gbps. It is relatively thick, feels durable, and comes with a lifetime warranty. I like the braided nylon finish and color-matched cable tie. I also tried the QDOS Powerloop (£20), a handy wearable charging cable that doubles as a lanyard strap. It’s thick, woven, and durable, with screw-off ends that reveal a USB-C cable capable of supplying 60 watts of power and 480 Mbps of data.
Chargeasap Connect Pro for $60: Magnetic tip cables can be handy for kids and folks with dexterity issues. The idea is you stick the relevant tip in your device and then attach the cable magnetically when you need to charge. This one also has an LED display to show real-time power usage. It works best if you leave the tips in your devices, but that means they can’t be charged by regular cables, and the tips are very easy to lose if you remove them. Performance-wise, it’s a standard 100-watt charging cable.
Krafted Connex for £30: I like the idea of a Swiss Army Knife–style charging cable keyring, but the execution here is flawed. It does offer USB-A, USB-C, Lightning, and MicroUSB, but the flip-out plugs don’t have any cable attached, so they are not very adjustable, making it tough to plug into some ports. The Rolling Square InCharge X 6-in-1 Cable above is the same price and works far better.
Scosche Strikeline Premium USB-C Cable for $25: This braided cable comes in various lengths all the way up to the 10-foot cable I tested, and it’s a good alternative to our best long cable above if data transfer is more important to you than charging speed because it offers 5 Gbps data speeds, but only 60 watts for charging.
Ugreen Uno USB-C Cable for $10: I love the smiley-faced Uno line from UGreen, but I assumed the display on this cable would show the charging rate. It does not. It just displays smiley eyes when charging and changes when fully charged. I tested the 6.6-foot cable, but it also comes in 1.6-, 3.3-, or 10-foot lengths. It feels durable and is reasonably priced, but it is rated at a very ordinary 100 watts and 480 Mbps.
Native Union Pocket Cable for $30: This wee braided USB-C to USB-C cable is perfect for slipping on a keyring to ensure you are never caught without a cable. It’s a nice design with braided cables, but you only get around 7 inches, and it maxes out at 60 watts. It is built to last from recycled materials, USB-IF certified, and comes with a lifetime warranty.
Caudabe ChargeFlex for $25: This was our Lightning recommendation, and it’s still good, but the price has gone up and there’s no need to spend this much. It is a thick braided cable reinforced with Kevlar for durability. There is a leather clip you can use for cable management, and the ridged finish on the connectors makes them easy to grip when unplugging.
Cable Matters Gen 2 USB-A to USB-C cable for $10: This is a good alternative to our pick above if you want faster data transfer speeds (it maxes out at 10 Gbps), but it is limited to 15 watts for charging.
Bluebonnet Eco-Friendly Charging Cable for $25: Bluebonnet (an Austin-based studio named after the Texas state flower) made this cable from naturally biodegradable wheat straw. It promises 50,000 plus bends and uses plastic-free packaging. I love the dappled blue finish and the cream ends. They make it easy to pick this cable out of the crowd. It’s nothing special performance-wise, offering up to 60-watt charging and 480 Mbps data transfer.
RUGD Rhino Power USB-C to USB-C for £11: This is a solid option for folks in the UK seeking a tough cable. It has a braided nylon finish and can withstand a minimum of 100 kilograms of tension and 100,000 bends. It can also deliver up to 60 watts.
Iniu Braided USB-C Cable for $6: This is a cheap, 6.6-foot USB-C to USB-C charging cable that tops out at 100 watts. Data transfer is only 480 Mbps. One end lights up green when it’s charging.
Lindy USB 3.2 Type C to C Cable for $23: These active cables are suitable for hooking monitors up to your computer, and they support up to 8K at 60 Hz and 4K at 120 Hz. They also support DisplayPort 1.4. I tested the longer 3- and 5-meter variants that max out at 60 watts for Power Delivery and 10 Gbps for data (but they’re out of stock). The shorter cable linked here can go up to 20 Gbps. They work well and feel durable, but they’re a bit pricey.
Satechi USB-C to USB-C Charging Cable for $20: Gear from Satechi always has a classy look, and its braided nylon cables are no exception. This one is 6.5 feet, has a Velcro strap, and is capable of 100-watt charging, with support for PD and QC. Sadly, data transfer is limited to 480 Mbps.
Plugable Thunderbolt 4 Transfer Cable for $70: This active Thunderbolt 4 USB-C to USB-C cable matches our top pick with support for 100-watt charging and data transfers up to 40 Gbps. It is 6.6 feet long and comes with a two-year warranty.
Belkin Boost Charge USB-C for $10: This cable maxes out at 12 watts and 480 Mbps. The basic PVC finish is the cheapest, but you can opt for braided nylon too; both come in black or white at 3.3 or 6.6 feet. These cables are USB-IF certified and work as advertised (I’ve been using one in the car for the last few months).
FiiO’s BT11 is a high-fidelity audio Bluetooth transmitter for devices with a USB-C port, including smartphones, laptops, and handheld gaming PCs. It uses a pair of Qualcomm DSPs to stream up to 24-Bit 96kHz wireless audio. It supports Bluetooth 5.4 and lossless codecs such as aptX Lossless and LDAC. It will be available starting 10.8.24.
Sei Investments Co. grew its holdings in U.S. Bancorp (NYSE:USB – Free Report) by 5.1% during the second quarter, HoldingsChannel reports. The fund owned 1,852,257 shares of the financial services provider’s stock after purchasing an additional 90,691 shares during the period. Sei Investments Co.’s holdings in U.S. Bancorp were worth $73,535,000 as of its most recent SEC filing.
Several other hedge funds and other institutional investors have also made changes to their positions in USB. Redwood Wealth Management Group LLC purchased a new position in U.S. Bancorp in the second quarter valued at approximately $25,000. Financial Synergies Wealth Advisors Inc. acquired a new position in shares of U.S. Bancorp in the 1st quarter valued at $30,000. LRI Investments LLC purchased a new position in shares of U.S. Bancorp in the 1st quarter valued at $31,000. Eagle Bay Advisors LLC raised its stake in U.S. Bancorp by 93.2% during the 1st quarter. Eagle Bay Advisors LLC now owns 686 shares of the financial services provider’s stock worth $31,000 after acquiring an additional 331 shares in the last quarter. Finally, 1620 Investment Advisors Inc. purchased a new stake in U.S. Bancorp in the second quarter valued at $30,000. Institutional investors and hedge funds own 77.60% of the company’s stock.
U.S. Bancorp Trading Down 1.0 %
NYSE:USB opened at $46.01 on Friday. U.S. Bancorp has a 1 year low of $30.47 and a 1 year high of $47.31. The company has a debt-to-equity ratio of 1.05, a quick ratio of 0.80 and a current ratio of 0.81. The stock has a fifty day moving average price of $44.39 and a two-hundred day moving average price of $42.31. The stock has a market capitalization of $71.80 billion, a price-to-earnings ratio of 15.24, a PEG ratio of 4.36 and a beta of 1.04.
U.S. Bancorp (NYSE:USB – Get Free Report) last released its quarterly earnings data on Wednesday, July 17th. The financial services provider reported $0.98 EPS for the quarter, topping analysts’ consensus estimates of $0.94 by $0.04. U.S. Bancorp had a net margin of 12.55% and a return on equity of 13.34%. The firm had revenue of $6.87 billion for the quarter, compared to the consensus estimate of $6.81 billion. During the same quarter in the previous year, the firm earned $1.12 earnings per share. The firm’s revenue was down 4.3% on a year-over-year basis. As a group, sell-side analysts anticipate that U.S. Bancorp will post 3.87 earnings per share for the current fiscal year.
U.S. Bancorp announced that its board has approved a stock repurchase plan on Thursday, September 12th that allows the company to repurchase $5.00 billion in outstanding shares. This repurchase authorization allows the financial services provider to purchase up to 7% of its stock through open market purchases. Stock repurchase plans are usually a sign that the company’s board of directors believes its shares are undervalued.
U.S. Bancorp Increases Dividend
The company also recently disclosed a quarterly dividend, which will be paid on Tuesday, October 15th. Investors of record on Monday, September 30th will be paid a $0.50 dividend. This is an increase from U.S. Bancorp’s previous quarterly dividend of $0.49. This represents a $2.00 annualized dividend and a yield of 4.35%. The ex-dividend date of this dividend is Monday, September 30th. U.S. Bancorp’s dividend payout ratio (DPR) is presently 66.23%.
Insider Buying and Selling
In other news, Director Aleem Gillani purchased 10,000 shares of the company’s stock in a transaction dated Thursday, July 18th. The stock was acquired at an average price of $44.99 per share, for a total transaction of $449,900.00. Following the completion of the transaction, the director now directly owns 10,000 shares in the company, valued at approximately $449,900. The acquisition was disclosed in a document filed with the SEC, which is accessible through this link. 0.23% of the stock is currently owned by insiders.
Analyst Ratings Changes
USB has been the topic of a number of research analyst reports. UBS Group lifted their target price on U.S. Bancorp from $43.00 to $46.00 and gave the stock a “neutral” rating in a research report on Thursday, July 18th. Citigroup lifted their price target on U.S. Bancorp from $45.00 to $49.00 and gave the stock a “neutral” rating in a research report on Thursday, July 18th. JPMorgan Chase & Co. downgraded U.S. Bancorp from an “overweight” rating to a “neutral” rating and set a $43.50 price objective for the company. in a report on Thursday, June 27th. StockNews.com raised shares of U.S. Bancorp from a “sell” rating to a “hold” rating in a report on Wednesday, July 17th. Finally, Wells Fargo & Company increased their price target on shares of U.S. Bancorp from $48.00 to $52.00 and gave the stock an “overweight” rating in a research note on Thursday, July 18th. Thirteen investment analysts have rated the stock with a hold rating and seven have assigned a buy rating to the company’s stock. According to MarketBeat.com, the company currently has an average rating of “Hold” and an average target price of $48.18.
U.S. Bancorp, a financial services holding company, provides various financial services to individuals, businesses, institutional organizations, governmental entities, and other financial institutions in the United States. It operates through Wealth, Corporate, Commercial and Institutional Banking; Consumer and Business Banking; Payment Services; and Treasury and Corporate Support segments.
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There are a few things to keep in mind when you’re shopping for USB flash drives, and we also have some tips for using them.
Capacity: To decide on the capacity you need, first check the size of the folders or files you want to copy. Each USB drive in our guide has a stated capacity, but the usable storage will be slightly less than that, because the device’s firmware requires space.
Speed: USB standards are advancing all the time, and we recommend USB 3.0 as a minimum, though higher is better. While USB standards have different theoretical maximum speeds, it’s crucial to check the manufacturer’s stated read and write speeds for each drive. If you’re primarily transferring data, you’ll want to look for a drive with high write speeds. If you’re planning on launching software on a computer through the drive (like a video game), then you’ll want a model with high read speeds. Manufacturers will state average speeds, but most drives are much faster at transferring large files and tend to be far slower at transferring small files.
Compatibility: Many flash drives will work with any device with the relevant port, but check compatibility to avoid disappointment. If you want to use a drive with an Android device or one of the latest iPhone 15 range, it will require USB on-the-go (OTG) support. Most Android devices do support USB OTG. You will get a notification when you insert a flash drive with options that should include File Transfer. You can try the USB OTG Checker app to confirm support if you’re unsure. Apple’s earlier iPhones and iPads don’t support USB OTG, but you can install a companion app for drives, like SanDisk’s iXpand series.
Connectors: Most flash drives have USB-A connectors, but you can also get drives with USB-C, MicroUSB, and Lightning connectors. If you plan on using a flash drive with your smartphone and computer, snag one with both of the required types of connectors. You can also buy USB hubs with multiple ports or adapters, but pay close attention to the supported standard or it may limit your data transfer speeds. This Anker USB-A to USB-C adapter, for example, is USB 3.0.
Security: Remember that USB drives can cause security issues, particularly for businesses, and you should never plug in random drives you find lying around. If you plan to keep sensitive data on your flash drive, then consider biometric or passcode protection, and look into the level of encryption it offers. There are software services that offer encryption and allow you to password-protect your files on any USB flash drive.
The very name, Universal Serial Bus (or USB) is an ambitious promise: One port to rule them all. The reality is unfortunately messier than that. While your phone, tablet, and laptop might all use the same USB-C port for charging and transferring data these days, they can all work differently.
What’s USB4? What’s Thunderbolt? Is it the same as USB-C? I’m here to help answer all of those questions, so you can get the best performance out of your devices.
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Glossary of USB Terms
First, it’s important to define a few terms upfront.
USB 2.X/USB 3.X/USB4
Every USB device is built to some version of the USB specification, managed by the USB Implementer’s Forum (USB-IF). These versions are mainly characterized by how much data they can transfer and how much power they can deliver (at least, those are the main things you need to care about). While most of these devices are interoperable as long as they use the same type of port, the entire chain will conform to the slowest part of the chain. Say you plug a USB 3.2 solid-state drive into a USB 3.2 port on your computer, but use a USB 3.0 cable—data will only transfer at USB 3.0 speeds. Make sure every link in your chain is rated for the speed you need.
USB Power Delivery (or USB-PD)
Instead of carrying a charger for every single device you own, you might opt for a charging adapter that can juice up multiple devices via several USB-C Power Delivery (USB-C PD) ports. Power Delivery is a fast-charging method that supports up to 240 watts of power and allows gadgets to safely talk to chargers to sort out the correct power needs. You’ll find these kinds of ports on USB hubs as well, sometimes referred to as “pass-through charging,” though it’s not an official term.
Make sure the wattage of a USB-C port on a charging adapter or hub can handle what your device needs. A MacBook Pro typically needs 96 watts during intense workloads (though you can still charge them at lower wattage), so you’d probably need a 100-watt USB-C port on the charging adapter or USB hub for the best charging experience.
USB-C and USB-A
These terms refer to the physical shape of the connectors and ports on devices. USB-C is common and looks like a small, elongated oval. It’s also reversible, so you can’t plug it in the wrong way. USB-A is the older, rectangular port you’ve seen for years. There are a lot more types of USB connectors, but these are the two you’re most likely to see in charging adapters, hubs, and docking stations today.
SuperSpeed
You might also see some USB devices marketed with terms like “SuperSpeed,” “SuperSpeedPlus,” and “SuperSpeed USB 5/10/20 Gbps.” These terms were initially meant to be more helpful, marketable labels to denote what generation or speed a USB port was, but unfortunately, it only made things more confusing. In most cases, you can ignore these labels and look at the actual speed ratings.
What Is Going on With USB Generations?
It would be nice if you could plug a USB 3.2 device into a USB 3.2 port using a USB 3.2 cable and trust that it all works. Unfortunately, it’s way more complicated than that.
When USB 3.0 came out in 2008 it had a max speed of around 5 gigabits per second (Gbps). However, when USB 3.1 came out in 2013 with a max speed of 10 Gbps, the 5-Gbps version was renamed to USB 3.1 Gen 1, while the new, faster spec was USB 3.1 Gen 2. Confused yet? Well, it gets worse.
After USB 3.2 came out in 2019, the 5-Gbps USB was rebranded again to “USB 3.2 Gen 1,” the 10-Gbps version became “USB 3.2 Gen 2,” and the new 20-Gbps specification became—you guessed it—USB 3.2 Gen 2×2. Wait, what? The “2×2” refers to running two 10 Gbps lanes of data simultaneously. You don’t need to know all of this. Many USB hub and docking station manufacturers have given up on names, labels, and symbols. They’ve started printing the maximum speed next to ports directly.
Figuring out the right connections you need for your setup can be daunting, and the confusing, arcane USB terminology only makes it worse. You can check out our explainer on parsing USB terms in our Best USB Hubs guide. For the short version, here are the basics you should keep in mind:
Check your ports’ speeds, and don’t rely on version numbers. For a lot of confusing reasons, ports labeled as USB 3.0, 3.1, and 3.2 can all have the same speed or wildly different speeds. For this reason, docking station manufacturers have recently started opting to add speeds (usually written like “5 Gbps”) directly onto individual ports. Use these ports for transferring heavy amounts of data, and slower ports for things like your keyboard and mouse.
Thunderbolt is best for lightning-fast data transfers, or high-res displays. Thunderbolt is like a supercharged version of USB, and it even uses USB-C ports. However, Thunderbolt ports are capable of transferring massive amounts of data. This makes it ideal for things like moving uncompressed video files around, as well as things like 4K (or even 8K) displays or lower-resolution monitors with extra high refresh rates.
Keep in mind your power needs. Most laptop docking stations will have some form of power connector and USB Power Delivery (or USB-PD) that can send power through to your laptop. You’ll also sometimes see this referred to as “passthrough charging.” Most devices you connect will require their own power as well, especially if you want to connect monitors or charge your phone and tablet. If you plan to connect a lot of power-hungry devices, make sure your docking station can handle your power needs.
Anker wisely set out to make the most out of the overpowered USB-C chargers we have today. The 2-in-1 USB-C to USB-C Cable 140W (yep, that’s its name) can charge two devices using a single charging port. It also stops juicing fully charged gadgets and provides up to 140W PD charging for one device. It has a durable braided cable and comes in 1ft and 3ft lengths.
Vontobel Holding Ltd. cut its stake in shares of U.S. Bancorp (NYSE:USB – Free Report) by 16.4% in the 4th quarter, according to the company in its most recent disclosure with the Securities and Exchange Commission (SEC). The firm owned 47,952 shares of the financial services provider’s stock after selling 9,383 shares during the quarter. Vontobel Holding Ltd.’s holdings in U.S. Bancorp were worth $2,075,000 as of its most recent SEC filing.
Several other hedge funds have also recently modified their holdings of the stock. CGC Financial Services LLC purchased a new position in U.S. Bancorp in the fourth quarter worth $25,000. BKM Wealth Management LLC purchased a new position in U.S. Bancorp in the fourth quarter worth $26,000. Planned Solutions Inc. purchased a new position in U.S. Bancorp in the fourth quarter worth $27,000. Legacy Financial Group LLC purchased a new position in U.S. Bancorp in the third quarter worth $30,000. Finally, Compass Wealth Management LLC purchased a new position in U.S. Bancorp in the fourth quarter worth $39,000. 77.60% of the stock is owned by institutional investors and hedge funds.
Analyst Upgrades and Downgrades
USB has been the subject of several research analyst reports. Evercore ISI increased their price objective on U.S. Bancorp from $46.00 to $48.00 and gave the stock an “in-line” rating in a research report on Thursday, March 28th. Piper Sandler restated a “neutral” rating on shares of U.S. Bancorp in a research report on Friday, January 26th. StockNews.com cut U.S. Bancorp from a “hold” rating to a “sell” rating in a research report on Tuesday, February 20th. Jefferies Financial Group raised their price target on U.S. Bancorp from $44.00 to $46.00 and gave the company a “hold” rating in a research report on Monday, April 8th. Finally, Compass Point upgraded U.S. Bancorp from a “neutral” rating to a “buy” rating and raised their price target for the company from $46.00 to $49.00 in a research report on Friday, March 22nd. One equities research analyst has rated the stock with a sell rating, fourteen have given a hold rating and nine have assigned a buy rating to the stock. According to data from MarketBeat.com, the stock currently has a consensus rating of “Hold” and a consensus target price of $46.91.
Shares of NYSE:USB opened at $39.44 on Friday. The stock’s 50-day moving average price is $42.31 and its two-hundred day moving average price is $39.72. The company has a current ratio of 0.81, a quick ratio of 0.81 and a debt-to-equity ratio of 1.05. U.S. Bancorp has a 12-month low of $27.27 and a 12-month high of $45.85. The firm has a market cap of $61.45 billion, a price-to-earnings ratio of 12.02, a PEG ratio of 2.12 and a beta of 1.05.
U.S. Bancorp (NYSE:USB – Get Free Report) last issued its quarterly earnings results on Wednesday, April 17th. The financial services provider reported $0.90 earnings per share (EPS) for the quarter, topping analysts’ consensus estimates of $0.89 by $0.01. The firm had revenue of $6.72 billion for the quarter, compared to analyst estimates of $6.71 billion. U.S. Bancorp had a return on equity of 14.89% and a net margin of 13.36%. The firm’s quarterly revenue was down 6.4% on a year-over-year basis. During the same period last year, the company earned $1.16 EPS. On average, research analysts forecast that U.S. Bancorp will post 3.87 EPS for the current year.
U.S. Bancorp Dividend Announcement
The company also recently disclosed a quarterly dividend, which was paid on Monday, April 15th. Stockholders of record on Friday, March 29th were paid a $0.49 dividend. This represents a $1.96 annualized dividend and a dividend yield of 4.97%. The ex-dividend date was Wednesday, March 27th. U.S. Bancorp’s dividend payout ratio is currently 59.76%.
Insider Activity
In other news, insider Terrance R. Dolan sold 26,583 shares of U.S. Bancorp stock in a transaction dated Tuesday, January 30th. The stock was sold at an average price of $43.37, for a total value of $1,152,904.71. Following the transaction, the insider now directly owns 144,236 shares of the company’s stock, valued at approximately $6,255,515.32. The transaction was disclosed in a filing with the Securities & Exchange Commission, which is accessible through the SEC website. In related news, EVP James L. Chosy sold 21,582 shares of the business’s stock in a transaction that occurred on Friday, February 16th. The stock was sold at an average price of $41.47, for a total transaction of $895,005.54. Following the transaction, the executive vice president now directly owns 164,880 shares of the company’s stock, valued at approximately $6,837,573.60. The transaction was disclosed in a filing with the Securities & Exchange Commission, which is accessible through this hyperlink. Also, insider Terrance R. Dolan sold 26,583 shares of the business’s stock in a transaction that occurred on Tuesday, January 30th. The stock was sold at an average price of $43.37, for a total value of $1,152,904.71. Following the transaction, the insider now directly owns 144,236 shares in the company, valued at $6,255,515.32. The disclosure for this sale can be found here. Corporate insiders own 0.23% of the company’s stock.
U.S. Bancorp, a financial services holding company, provides various financial services to individuals, businesses, institutional organizations, governmental entities, and other financial institutions in the United States. It operates through Wealth, Corporate, Commercial and Institutional Banking; Consumer and Business Banking; Payment Services; and Treasury and Corporate Support segments.
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The stock market always overreacts, and this year it seems as if investors believe dividend stocks have become toxic. But a look at yields on quality dividend stocks relative to the market underlines what may be an excellent opportunity for long-term investors to pursue growth with an income stream that builds up over the years.
The current environment, in which you can get a yield of more than 5% yield on your cash at a bank or lock in a yield of 4.57% on a10-year U.S. Treasury note BX:TMUBMUSD10Y
or close to 5% on a 20-year Treasury bond BX:TMUBMUSD20Y
seems to have made some investors forget two things: A stock’s dividend payout can rise over the long term, and so can it is price.
It is never fun to see your portfolio underperform during a broad market swing. And people have a tendency to prefer jumping on a trend hoping to keep riding it, rather than taking advantage of opportunities brought about by price declines. We may be at such a moment for quality dividend stocks, based on their yields relative to that of the benchmark S&P 500 SPX.
Drew Justman of Madison Funds explained during an interview with MarketWatch how he and John Brown, who co-manage the Madison Dividend Income Fund, BHBFX MDMIX and the new Madison Dividend Value ETF DIVL,
use relative dividend yields as part of their screening process for stocks. He said he has never seen such yields, when compared with that of the broad market, during 20 years of work as a securities analyst and portfolio manager.
Dividend stocks are down
Before diving in, we can illustrate the market’s current loathing of dividend stocks by comparing the performance of the Schwab U.S. Equity ETF SCHD,
which tracks the Dow Jones U.S. Dividend 100 Index, with that of the SPDR S&P 500 ETF Trust SPY.
Let’s look at a total return chart (with dividends reinvested) starting at the end of 2021, since the Federal Reserve started its cycle of interest rate increases in March 2022:
FactSet
The Dow Jones U.S. Dividend 100 Index is made up of “high-dividend-yielding stocks in the U.S. with a record of consistently paying dividends, selected for fundamental strength relative to their peers, based on financial ratios,” according to S&P Dow Jones Indices.
The end results for the two ETFs from the end of 2021 through Tuesday are similar. But you can see how the performance pattern has been different, with the dividend stocks holding up well during the stock market’s reaction to the Fed’s move last year, but trailing the market’s recovery as yields on CDs and bonds have become so much more attractive this year. Let’s break down the performance since the end of 2021, this time bringing in the Madison Dividend Income Fund’s Class Y and Class I shares:
Fund
2023 return
2022 return
Return since the end of 2021
SPDR S&P 500 ETF Trust
14.9%
-18.2%
-6.0%
Schwab U.S. Dividend Equity ETF
-3.8%
-3.2%
-6.9%
Madison Dividend Income Fund – Class Y
-4.7%
-5.4%
-9.9%
Madison Dividend Income Fund – Class I
-4.7%
-5.3%
-9.7%
Source: FactSet
Dividend stocks held up well during 2022, as the S&P 500 fell more than 18%. But they have been left behind during this year’s rally.
The Madison Dividend Income Fund was established in 1986. The Class Y shares have annual expenses of 0.91% of assets under management and are rated three stars (out of five) within Morningstar’s “Large Value” fund category. The Class I shares have only been available since 2020. They have a lower expense ratio of 0.81% and are distributed through investment advisers or through platforms such as Schwab, which charges a $50 fee to buy Class I shares.
The opportunity — high relative yields
The Madison Dividend Income Fund holds 40 stocks. Justman explained that when he and Brown select stocks for the fund their investible universe begins with the components of the Russell 1000 Index RUT,
which is made up of the largest 1,000 companies by market capitalization listed on U.S. exchanges. Their first cut narrows the list to about 225 stocks with dividend yields of at least 1.1 times that of the index.
The Madison team calculates a stock’s relative dividend yield by dividing its yield by that of the S&P 500. Let’s do that for the Schwab U.S. Equity ETF SCHD
(because it tracks the Dow Jones U.S. Dividend 100 Index) to illustrate the opportunity that Justman highlighted:
Index or ETF
Dividend yield
5-year Avg. yield
10-year Avg. yield
15-year Avg. yield
Relative yield
5-year Avg. relative yield
10-year Avg. relative yield
15-year Avg. relative yield
Schwab U.S. Dividend Equity ETF
3.99%
3.41%
3.20%
3.16%
2.6
2.1
1.8
1.6
S&P 500
1.55%
1.62%
1.79%
1.92%
Source: FactSet
The Schwab U.S. Equity ETF’s relative yield is 2.6 — that is, its dividend yield is 2.6 times that of the S&P 500, which is much higher than the long-term averages going back 15 years. If we went back 20 years, the average relative yield would be 1.7.
Examples of high-quality stocks with high relative dividend yields
After narrowing down the Russell 1000 to about 225 stocks with relative dividend yields of at least 1.1, Justman and Brown cut further to about 80 companies with a long history of raising dividends and with strong balance sheets, before moving further through a deeper analysis to arrive at a portfolio of about 40 stocks.
When asked about oil companies and others that pay fixed quarterly dividends plus variable dividends, he said, “We try to reach out to the company and get an estimate of special dividends and try to factor that in.” Two examples of companies held by the fund that pay variable dividends are ConocoPhillips COP, -0.29%
and EOG Resources Inc. EOG, +0.52%.
Since the balance-sheet requirement is subjective “almost all fund holdings are investment-grade rated,” Justman said. That refers to credit ratings by Standard & Poor’s, Moody’s Investors Service or Fitch Ratings. He went further, saying about 80% of the fund’s holdings were rated “A-minus or better.” BBB- is the lowest investment-grade rating from S&P. Fidelity breaks down the credit agencies’ ratings hierarchy.
Justman named nine stocks held by the fund as good examples of quality companies with high relative yields to the S&P 500:
Now let’s see how these companies have grown their dividend payouts over the past five years. Leaving the companies in the same order, here are compound annual growth rates (CAGR) for dividends.
Before showing this next set of data, let’s work through one example among the nine stocks:
If you had purchased shares of Home Depot Inc. HD, -0.39%
five years ago, you would have paid $193.70 a share if you went in at the close on Oct. 10, 2018. At that time, the company’s quarterly dividend was $1.03 cents a share, for an annual dividend rate of $4.12, which made for a then-current yield of 2.13%.
If you had held your shares of Home Depot for five years through Tuesday, your quarterly dividend would have increased to $2.09 a share, for a current annual payout of $8.36. The company’s dividend has increased at a compound annual growth rate (CAGR) of 15.2% over the past five years. In comparison, the S&P 500’s weighted dividend rate has increased at a CAGR of 6.24% over the past five years, according to FactSet.
That annual payout rate of $8.36 would make for a current dividend yield of 2.79% for a new investor who went in at Tuesday’s closing price of $299.22. But if you had not reinvested, the dividend yield on your five-year-old shares (based on what you would have paid for them) would be 4.32%. And your share price would have risen 54%. And if you had reinvested your dividends, your total return for the five years would have been 75%, slightly ahead of the 74% return for the S&P 500 SPX during that period.
Home Depot hasn’t been the best dividend grower among the nine stocks named by Justman, but it is a good example of how an investor can build income over the long term, while also enjoying capital appreciation.
Here’s the dividend CAGR comparison for the nine stocks:
This isn’t to say that Justman and Brown have held all of these stocks over the past five years. In fact, Lowe’s Cos. LOW, +0.27%
was added to the portfolio this year, as was United Parcel Service Inc. UPS, -0.16%.
But for most of these companies, dividends have compounded at relatively high rates.
When asked to name an example of a stock the fund had sold, Justman said he and Brown decided to part ways with Verizon Communications Inc. VZ, -0.94%
last year, “as we became concerned about its fundamental competitive position in its industry.”
Summing up the scene for dividend stocks, Justman said, “It seems this year the market is treating dividend stocks as fixed-income instruments. We think that is a short-term issue and that this is a great opportunity.”
These reports, excerpted and edited by Barron’s, were issued recently by investment and research firms. The reports are a sampling of analysts’ thinking; they should not be considered the views or recommendations of Barron’s. Some of the reports’ issuers have provided, or hope to provide, investment-banking or other services to the companies being analyzed.
The U.S. Federal Reserve said Wednesday that all 23 banks in this year’s stress tests withstood a hypothetical “severe” global recession and losses of up to $541 billion as well as a 40% decline in commercial real estate prices.
The banks in the 2023 stress tests hold about 20% of the office and downtown commercial real estate loans held by banks and should be able to handle office space weakness that has loomed amid slack demand for space in the wake of the COVID-19 pandemic.
“The projected decline in commercial real estate prices, combined with the substantial increase in office vacancies, contributes to projected loss rates on office properties that are roughly triple the levels reached during the 2008 financial crisis,” the Fed said in a prepared statement.
Fed vice chair of supervision Michael S. Barr said the exams confirm that the U.S. banking system remains resilient, even in the wake of the failure of Silicon Valley Bank, Signature Bank and First Republic Bank earlier this year.
Barr also alluded to comments he made last week when he said the Fed should consider a wider range of risks that could derail banks in a process he described as reverse stress tests.
“We should remain humble about how risks can arise and continue our work to ensure that banks are resilient to a range of economic scenarios, market shocks, and other stresses,” Barr said in a prepared statement.
The bank stress tests are closely watched because they help determine what capital banks have left over for stock buybacks and dividends. However, expectations are not particularly high at the current time for any huge payouts to investors given talk by regulators about high capital requirements tied to Basel III international banking laws, as well as a challenging economic environment with interest rates on the rise in an attempt to cool economic activity and tame inflation.
Senior Fed officials said banks will be clear to provide updates on their stock buybacks and dividends after the market close on Friday.
For the first time, the Fed conducted an “exploratory market shock” on the trading books of the U.S.’s eight largest banks including greater inflationary pressures and rising interest rates.
The results showed that the largest banks’ trading books were resilient to the rising rate environment tested. That group included Bank of America Corp., the Bank of New York Mellon, Citigroup Inc., the Goldman Sachs Group Inc., JPMorgan Chase & Co. , Morgan Stanley , State Street Corp, and Wells Fargo & Co.
Senior federal officials said they’re studying a wider application of the exploratory market shock to other banks.
In last year’s tests, the Fed did not place an emphasis on a rapid rise in interest rates partly because expectations were high for a recession with lower interest rates in 2023. Instead, interest rates rose. That market dynamic was a factor in the collapse of Silicon Valley Bank, which sold securities with lower interest rates at a loss to cover an increase in withdrawals, only to spark a run on the bank.
All told, the Fed said the 23 banks in the stress test managed to maintain their capital requirements even with a projected $541 billion in losses. (See breakdown below).
U.S. Federal Reserve chart
Under the most severe stress, the aggregate common equity risk-based capital ratio would decline by 2.3% to a minimum of 10.1%.
Other facets of the hypothetical recession included a “substantial” increase in office vacancies, a 38% reduction in house prices and a 6.4% increase in U.S. unemployment to a high of 10%. The drop in house prices in this year’s stress tests is worse than the decline in the Global Financial Crisis in 2008.
“The results looked pretty good,” said Maclyn Clouse, a professor of finance at the University of Denver’s Daniels College of Business. “The banks were in pretty good shape from a capital standpoint and they’d be able to withstand some shock. It’s good news.”
Barr’s remark on Fed officials being “humble” reflects the fact that regulators largely missed the Global Financial Crisis as well as the sudden demise of Silicon Valley Bank in March.
“They need to be humble,” Clouse said. “We need to be a little more humble about the results and a little more alert about new challenges that normally haven’t been looked at with stress tests.”
This year, the banks that took part in the stress tests including Bank of America Corp. BAC, -0.60%,
Bank of New York Mellon Corp. BK, -0.64%,
Capitol One Financial Corp. COF, +0.52%,
Charles Schwab Corp. SCHW, +1.01%,
Citigroup C, -0.37%,
Citizens Financial Group Inc. CFG, -1.61%
and Goldman Sachs Group Inc. GS, +0.07%.
KBW analyst David Konrad said in a June 22 research note he expected no “huge surprises” in addition to capital uncertainty around dividends and buybacks already expected by Wall Street.
Providing guidance on how the Fed will study bank strength, Fed chair of supervision Michael Barr said last week that the Fed needs to consider “reverse stress tests” to look at “different ways an institution can die” instead of simply submitting banks to a specific list of hypothetical hardships.
“We have to work harder at looking at patterns we haven’t seen before,” Barr said at an appearance on June 20.
Bank of America BAC, Citigroup C, JPMorgan Chase JPM and Wells Fargo WFC said Thursday that they are each making $5 billion in uninsured deposits into First Republic Bank FRC as part of a $30 billion backstop by 11 banks against the ravaged banking landscape of the past week.
However, First Republic stock fell 14.7% in after-hours trading after the bank said it would suspend its dividend to conserve cash. The bank last paid a quarterly dividend of 27 cents a share on Feb. 9 to shareholders of record as of Jan. 26.
U.S. Bancorp operates as a bank holding company, which offers financial services including lending and depository services, cash management, foreign exchange and trust and investment management. The firm also offers mortgage, refinance, auto, boat and RV loans, credit lines, credit card services, merchant, bank, checking and savings accounts, debit cards, online and mobile banking, ATM processing, mortgage banking, insurance, brokerage and leasing services. The company was founded on April 2, 1929, and is headquartered in Minneapolis, MN.
UNIVERSAL AND ACCESSIBLE SOLUTION FOR ALL LEARNING ENVIRONMENTS, EGAMING, PODCASTS AND MORE
Press Release –
Aug 19, 2022
MIDDLETOWN, R.I., August 19, 2022 (Newswire.com)
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