Retirement investors choosing between Wells Fargo (NYSE:WFC | WFC Price Prediction) and Bank of America (NYSE:BAC) face one question: which big-bank dividend belongs in an income portfolio? Both raised payouts this summer and trade near 10x to 11x forward earnings. Wells Fargo fell 8.91% and Bank of America 13.1% over the past month. Bank of America comes out ahead.

Wells Fargo lifted its quarterly dividend to $0.50 from $0.45, putting the forward annualized payout at $2 per share, or about 2.44% yield at $81.95. Bank of America raised its payment to $0.32 from $0.28, for a forward payout of $1.28 and a yield near 2.35% at $54.47.

Both payouts are covered equally well. Dividends took about 27% of Wells Fargo’s $6.96 EPS and about 27% of Bank of America’s $4.35. Bank of America’s raise was roughly 14% against Wells Fargo’s 11% increase. Wells Fargo wins on yield, with its quarterly payout climbing from $0.10 in early 2021 to $0.50 today.

Wells Fargo paid $0.51 per quarter through May 2020, then $0.10 starting in August 2020. Bank of America kept paying $0.18 and raised it to $0.21 in September 2021. Bank of America’s payout sat at $0.01 from 2009 through 2014, while Wells Fargo paid $0.05 in several 2009 and 2010 quarters. In 2020, Bank of America held its dividend and Wells Fargo cut.

Bank of America carries a deeper capital cushion. Its CET1 ratio was at 11.2% against a 10% minimum. Wells Fargo reported 10.3%, inside its 10% to 10.5% target range. Wells Fargo’s credit is better, with net charge-offs of 34 basis points versus Bank of America’s 0.47%. A dividend that held through 2020 and a larger capital buffer matter most for reliable payouts.

Wells Fargo’s forward P/E is 10 versus 11 for Bank of America. But Bank of America’s PEG ratio is 0.846 while Wells Fargo’s is 1.385. Bank of America’s second-quarter EPS rose 34% to $1.21, its fifth straight beat. Wells Fargo’s rose 25% to $2.

Analysts favor Bank of America. It has 6 strong buy and 15 buy ratings against 3 holds, with a consensus target of $67.33 suggesting about 24% upside. Wells Fargo has 4 strong buys, 13 buys and 9 holds, with a $99.20 target suggesting about 21% upside.

Bank of America leads in two of three categories and offers the stronger dividend profile for retirement portfolios. Its dividend held through 2020 and its CET1 buffer is larger, worth more to an income investor than Wells Fargo’s slightly higher yield. It pairs durability with faster earnings growth at a lower growth-adjusted price. CEO Brian Moynihan said “capital generation and capital returns to investors remain strong.”

Wells Fargo fits a different retiree: one needing maximum current income and steadier stock. Its beta is 0.952 versus 1.214 for Bank of America, and management says the bank is growing its balance sheet after the asset cap was removed. Watch whether Wells Fargo keeps its CET1 inside target range while buying back shares, and whether Bank of America’s net interest income holds up if rates fall.

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