Financials Pump up Payouts After Stress Test

by Jim Woods | March 15, 2012 1:42 pm

IncreasingDividends Financials Pump up Payouts After Stress Test[1]Tuesday brought the premature news of the Federal Reserve’s latest “stress test”[2] of the banks. The release of the news — which was two days earlier than originally planned — prompted many financial institutions to announce plans to increase their quarterly dividend. The boosted payouts are great news for income investors because historically, financial stocks have been the backbone of a strong dividend-heavy portfolio.

In the wake of the financial crisis, many banks were forced to suspend and/or drastically reduce their payouts to shareholders. But with most banks now passing the latest stress test with flying colors, the green light is on for dividends. So, which companies jumped out of the gate to increase shareholder payouts? Let’s take a look at the biggest now:

Credit card issuer American Express (NYSE:AXP[3]) wasted no time after the Fed’s decision in announcing its intent to increase its shareholder payout. The company raised its quarterly payout 11% to 20 cents per share. The new dividend yield, based on the March 13 closing price of $54.25, is 1.47%. AmEx also plans on buying back shares worth $5 billion within the next two years.

Financial services holding company BB&T (NYSE:BBT[4]) also joined the dividend hike cavalcade on Tuesday, as the bank upped its payout to shareholders by 25% to 20 cents per share. The new dividend yield, based on Tuesday’s closing price of $30.40, is 2.63%.

Perhaps the most fiscally fit of all bank stocks is JPMorgan Chase (NYSE:JPM[5]), so it was no surprise to anyone that the banking giant was able to boost its payout. In fact, JPMorgan was the first company on Tuesday (before the bell) to announce its intention to lift its payout, and that opened up the floodgates for other banks to do the same. The company boosted its quarterly dividend 20% to 30 cents per share. The new dividend yield, based on Tuesday’s closing price of $43.39, is 2.77%.

JPMorgan also said its board had authorized a new $15 billion equity repurchase program, of which up to $12 billion is approved for 2012, and up to an additional $3 billion is approved through the end of the first quarter of 2013.

U.S. Bancorp (NYSE:USB[6]) made a serious move to boost its quarterly payout, raising its dividend 56% to 19.5 cents per share. The new dividend yield, based on Tuesday’s closing price of $31.01, is 2.52%. U.S. Bancorp also said it would buy back up to 100 million shares of its stock. The new buyback plan will replace the company’s current buyback program, and will run through March 2013.

Retail banking giant Wells Fargo (NYSE:WFC[7]) wasn’t going to be left in the dust after the stress tests, so it too raised its payout to shareholders, and it did so in grand fashion. Wells let the reins loose on its quarterly payout by 83% to 22 cents a share. The new dividend yield, based on Tuesday’s closing price of $33.33, is 2.64%. Wells also said it has plans to increase its share buybacks, but it did not provide details on how many shares would be repurchased.

The following day, two more big financial stocks boosted payouts. Comerica (NYSE:CMA[8]) said it plans to lift its quarterly payout 50% to 15 cents per share. That would make the new dividend yield, based on Wednesday’s closing price of $32.10, 1.87%. Comerica also announced up to $375 million worth of stock buybacks to be completed by the first quarter of 2013. Northern Trust (NASDAQ:NTRS[9]) also upped its payout, increasing its quarterly dividend 7.1% to 30 cents per share. The new dividend yield, based on Wednesday’s closing stock price of $45.94, is 2.61%. The company also said it would repurchase up to 10 million shares in a new buyback program.

Two notable financial giants that didn’t raise their respective dividends were Bank of America (NYSE:BAC[10]) and Citigroup (NYSE:C[11]). The former passed the Fed’s stress test, but the retail banking giant refrained from boosting its payout to shareholders. In Citi’s case, the company did not pass the test, and was prohibited from raising its dividend.

As of this writing, Jim Woods did not hold a position in any of the aforementioned stocks. Check out other companies increasing dividends in past weeks here[12].

Endnotes:
  1. [Image]: http://investorplace.com/hot-topics/companies-increasing-dividends/
  2. Federal Reserve’s latest “stress test”: http://investorplace.com/2012/03/federal-reserve-stress-tests-jpm-dividend-citi/
  3. AXP: http://studio-5.financialcontent.com/investplace/quote?Symbol=AXP
  4. BBT: http://studio-5.financialcontent.com/investplace/quote?Symbol=BBT
  5. JPM: http://studio-5.financialcontent.com/investplace/quote?Symbol=JPM
  6. USB: http://studio-5.financialcontent.com/investplace/quote?Symbol=USB
  7. WFC: http://studio-5.financialcontent.com/investplace/quote?Symbol=WFC
  8. CMA: http://studio-5.financialcontent.com/investplace/quote?Symbol=CMA
  9. NTRS: http://studio-5.financialcontent.com/investplace/quote?Symbol=NTRS
  10. BAC: http://studio-5.financialcontent.com/investplace/quote?Symbol=BAC
  11. C: http://studio-5.financialcontent.com/investplace/quote?Symbol=C
  12. here: http://investorplace.com/hot-topics/companies-increasing-dividends/

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