Ahead of the Curve: Dividend Increases A Developing Trend for Banks (OZRK, JPM, USB)

Since the credit crisis hit, banks have routinely cut their once "safe" dividend payouts, often at the request of regulators. Now data is emerging which shows that this trend is reversing and dividend increases could soon become the new trend in bank-land.

Illustrating this reversal in fortunes, today Arkansas-based Bank of the Ozarks, Inc. (Nasdaq: OZRK) raised their quarterly dividend 7.1% from $0.14 to $0.15. On an annualized basis the dividend is $0.60, representing a dividend yield of 1.6%.

Other banks have also hiked their dividends recently. According to a report today from Keefe, Bruyette & Woods (KBW), 17 banks raised their dividend so far this year.

In all of 2009, only 31 banks raised their dividends while 202 banks cut, omitted or discontinued their dividends, according to KBW.

KBW notes that since 2008, 276 banks cut, omitted or discontinued their dividend. 161 of these banks were TARP recipients. Of these 167 TARP recipients, 28 have repaid their TARP investment.

Four banks that have raised dividends in 2010 also raised them in 2009. Those banks are: Cheviot Financial Corp. (Nasdaq: CHEV), Heritage Financial Group (Nasdaq: HBOS), Hingham Institution for Savings (Nasdaq: HIFS), and Ohio Valley Banc Corp. (Nasdaq: OVBC).

Three banks that raised dividends in 2010 repaid TARP. Those banks are LSB Corp. (Nasdaq: LSBX), Bank of the Ozarks and Westamerica Bancorp. (Nasdaq: WABC).

While a few of the small regional banks have raised dividends, we have not seen any large U.S. banks raise their dividends even though most of them are out of TARP. This will likely be an event for later 2010 or 2011.

Many expected JP Morgan (NYSE: JPM) to lead the way with an expected dividend increase. US Bancorp (NYSE: USB) could also be in a position to raise its payout soon.

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