52-Week Dividend Increase: 36%
52-Week Stock Appreciation: 29%
Dividend Yield: 2.7%
It’s been quite a ride for Wells Fargo (WFC) since it took a $25 billion bailout from the U.S. Government back in 2008 as part of the Trouble Asset Relief Program.
But for investors, it’s turned out to be a positive one overall.
Like everyone else in the banking sector affected by the housing and mortgage-backed securities meltdown, Wells Fargo went into cleanup and write-down mode while also improving the credit quality of its loan portfolios.
It eventually paid off its TARP loan in December 2009, and now it’s the largest U.S. home lender, originating three out of every 10 home loans, and is the nation’s most valuable bank by market cap at $232 billion.
Despite three straight fiscal years (2010-12) of declining interest income (the banking equivalent of revenues), WFC has squeezed out three straight years of record profits, including nearly $19 billion in 2012. WFC’s recent second-quarter results mirror those of those prior fiscal years: lower revenue on a quarterly year-over-year comparison (down 4%), but improved profits, up almost 20% as it continues to focus on expense margins even as housing prices rise.
Meanwhile, CEO John Strumpf has made it a point to return value to shareholders, increasing Wells Fargo’s dividend twice in the past year — from 22 cents to 25, then to 30, for a total improvement of 36%. The upcoming quarterly payout stands 4 cents away from WFC’s pre-recession dividend. Also, shareholders have gotten nearly 30% in appreciation in the past year, putting WFC shares at all-time highs.
It’s good enough to make Wells Fargo a major holding of Warren Buffett’s Berkshire Hathaway (BRK.B). That should be good enough for you.
Marc Bastow is an Assistant Editor at InvestorPlace.com. As of this writing he does not hold a position in any of the aforementioned securities.