Banks Dividends Hikes Coming, But Will Likely Be Below Historical Payouts (JPM, PNC, WFC, more...)
Tweet
Share
E-mail
Get Alerts JPM Hot Sheet
Price: $351.55 -1.6%
Rating Summary:
22 Buy, 25 Hold, 1 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 12 | Down: 15 | New: 40
Rating Summary:
22 Buy, 25 Hold, 1 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 12 | Down: 15 | New: 40
Join SI Premium – FREE
Yesterday, the Federal Reserve announced guidelines for banks to increase dividends following the financial crisis which resulted in most banks cutting their payouts to near nothing.
As part of the guidelines, banks must have repaid their TARP funds and must pass a 2-year stress test with Tier 1 capital above 5 percent, which is above the 4 percent in the original 2009 stress test. The guidelines initially apply to the 19 that were stressed tested in 2009.
According to analysts at Goldman Sachs, bank in a position to raise their dividends in Q1 include JPMorgan (NYSE: JPM), US Bancorp (NYSE: USB), PNC (NYSE: PNC) and Wells Fargo (NYSE: WFC).
Other banks that could boost their dividends include Bank of New York Mellon (NSYE: BK) and State Street (NYSE: STT).
Bank that have not yet repaid TARP and therefore cannot raise their dividends at this time include: Fifth Third (Nasdaq: FITB), Regions (NYSE: RF), SunTrust (NYSE: STI), and KeyCorp (NYSE: KEY).
While a number of banks will have the opportunity to raise their dividends, Goldman Sachs cautioned investors not to get too excited as payouts will not return to normal levels yet. The firm estimates banks will return to a 15-20 percent payout ratio in the near-term, which is below the media payout ratio of 40 percent in the past.
Other than dividends, bank investors can hope to see capital returns via shares buybacks. Goldman Sachs sees 40 percent of capital coming back in the form of dividends and 60 percent in the form of buybacks.
Goldman Sachs' two favorite bank names are Conviction Buy List-rated JP Morgan (NYSE: JPM) and Citigroup (NYSE: C).
The firm sees JP Morgan raising their quarterly dividend to the $0.15-$0.20 range in Q1 and increasing to a 30-40 percent payout at some point in the future.
The firm said Citiroup remains several quarters away from returning capital, but a government exit of its share position late in Q1 could serve as a catalyst to boost the share price.
As part of the guidelines, banks must have repaid their TARP funds and must pass a 2-year stress test with Tier 1 capital above 5 percent, which is above the 4 percent in the original 2009 stress test. The guidelines initially apply to the 19 that were stressed tested in 2009.
According to analysts at Goldman Sachs, bank in a position to raise their dividends in Q1 include JPMorgan (NYSE: JPM), US Bancorp (NYSE: USB), PNC (NYSE: PNC) and Wells Fargo (NYSE: WFC).
Other banks that could boost their dividends include Bank of New York Mellon (NSYE: BK) and State Street (NYSE: STT).
Bank that have not yet repaid TARP and therefore cannot raise their dividends at this time include: Fifth Third (Nasdaq: FITB), Regions (NYSE: RF), SunTrust (NYSE: STI), and KeyCorp (NYSE: KEY).
While a number of banks will have the opportunity to raise their dividends, Goldman Sachs cautioned investors not to get too excited as payouts will not return to normal levels yet. The firm estimates banks will return to a 15-20 percent payout ratio in the near-term, which is below the media payout ratio of 40 percent in the past.
Other than dividends, bank investors can hope to see capital returns via shares buybacks. Goldman Sachs sees 40 percent of capital coming back in the form of dividends and 60 percent in the form of buybacks.
Goldman Sachs' two favorite bank names are Conviction Buy List-rated JP Morgan (NYSE: JPM) and Citigroup (NYSE: C).
The firm sees JP Morgan raising their quarterly dividend to the $0.15-$0.20 range in Q1 and increasing to a 30-40 percent payout at some point in the future.
The firm said Citiroup remains several quarters away from returning capital, but a government exit of its share position late in Q1 could serve as a catalyst to boost the share price.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Citigroup set to join top banks in Anthropic IPO - Bloomberg
- The Andersons (ANDE) Declares $0.2 Quarterly Dividend; 1.2% Yield
- Meritage Homes Corporation (MTH) Declares $0.48 Quarterly Dividend; 2.7% Yield
Create E-mail Alert Related Categories
Analyst Comments, Dividends, Insiders' BlogRelated Entities
Goldman Sachs Conviction Buy List, JPMorgan, Citi, DividendSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
