JPMorgan or Bank of America: Which Dividend Stock Fits Retirement Better?

One bank fell short of earnings after a $1.2 billion settlement charge, while the other lifted its payout again. Still, the cheaper stock with the higher yield may not be the safer choice for retirement income. Three comparisons show the tradeoff.

JPMorgan Chase (NYSE:JPM | JPM Price Prediction) or Bank of America (NYSE:BAC): which bank dividend looks better for someone building a retirement portfolio now? Recent earnings helped sharpen the answer. Bank of America reported adjusted EPS of $1.08, below the $1.10 estimate, after a $1.2 billion regulatory settlement charge. JPMorgan posted EPS of $5.57 and a 20% return on tangible common equity. The bank also raised its quarterly dividend to $1.65 from $1.50.

Both banks earn money through the same two main channels. First is net interest income, or the spread between loan income and deposit costs. Second is fee revenue from trading, dealmaking, and wealth management. JPMorgan relies more heavily on Wall Street activity: in a recent quarter, corporate and investment bank revenue climbed 27% to $24.85 billion. Bank of America operates more like a deposit-driven lender, with $2 trillion in deposits and $1.2 trillion in loans, and its net interest income rose 8% to $16.45 billion in the latest quarter.

Valuation: Bank of America Trades at a Deep Discount

Bank of America changes hands at 12 times trailing earnings and 10 times forward earnings. JPMorgan trades at 14 times on both measures. The price-to-book gap is also wide, at 1.311 versus 2.662. Bank of America shares are down 8.69% year to date, while JPMorgan is up 5.79%. That weakness pushes Bank of America’s forward yield to about 2.6% based on a $1.28 annualized payout. JPMorgan yields about 2.0% on $6.60. Winner: Bank of America.

Dividend Growth and Coverage: JPMorgan Moves Faster

JPMorgan’s quarterly dividend has climbed from $1.05 in early 2024 to $1.65, an increase of roughly 57%. Over the same period, Bank of America moved from $0.24 to $0.32, or about 33%. Coverage looks solid at both banks. JPMorgan pays out about 26% of trailing EPS of $23.84, while Bank of America pays out roughly 28% of $4.19. CEO Jamie Dimon has emphasized the dividend as a priority: “After you pay your dividend, which hopefully will be steady, we really like investing in organic growth.” Winner: JPMorgan.

Capital Strength and Risk: JPMorgan Has the Larger Cushion

JPMorgan ended the latest quarter with a CET1 ratio of 13.9%, and Dimon has estimated “$30 billion or something of excess capital.” Bank of America’s CET1 ratio stands at 10.9%, which its CFO says is 90 basis points above the regulatory minimum. Bank of America also carries the higher beta, 1.192 versus 1.02, along with OCC and FinCEN consent orders, though management says those orders do not include an asset cap.

Both banks reduced dividends during the financial crisis, but Bank of America was paying only $0.01 per quarter from 2009 through 2012, while JPMorgan had returned to $0.25 by 2011. Over the past decade, JPMorgan shares gained 519.86%, compared with 263.38% for Bank of America. JPMorgan has its own risks to watch, including a card net charge-off rate of 3.33% and noninterest expense that rose 15% year over year. Winner: JPMorgan.

Conclusion: JPMorgan Wins the Retirement Spot

For investors nearing retirement or already there, JPMorgan appears to be the stronger dividend holding. It offers the larger capital buffer, a faster pace of dividend growth, and a stronger record of protecting shareholders through difficult cycles. The tradeoff is a slightly lower starting yield, which income-focused retirees may need to weigh carefully.

Bank of America may suit a different kind of investor: someone with a decade or more before needing income who wants a higher initial yield and a stock trading at a discount. Management expects net interest income to grow by 8% or more in a later period, offering a possible path to recovery. In the coming quarters, investors will want to see whether Bank of America delivers the positive operating leverage it has projected, while at JPMorgan the slower pace of buybacks remains a point to monitor.