Big Bank CEO: No Dividend Increase in 2014

If you're a shareholder of BB&T (NYSE: BBT  ) and were hoping it'd raise its dividend next year, I have bad news for you. According to its CEO Kelly King, the mid-Atlantic-based bank isn't planning on doing anything of the sort.

"There is still this downward pressure ... in terms of dividend payout rates," Kelly said on the company's most recent earnings call. He then went on to explain that it will be "challenging to raise dividends at a high level because ... we already have a very high level in terms of payout and dividend yield."

What Kelly is referring to when he mentions "downward pressure" is the Federal Reserve-administered comprehensive capital analysis and review process, or CCAR, which gives the central bank an up-or-down vote on a bank's capital plans.

In this year's CCAR instructions, the Fed didn't mince words, saying that "requests that imply common dividend payout ratios above 30% of projected after-tax net income available to common shareholders in either the BHC baseline or supervisory baseline will receive particularly close scrutiny."

Herein lies BB&T's dilemma.

As you can see in the chart above, it distributed nearly 54% of its earnings to shareholders over the last 12 months. This is more than any of its close competitors. For instance, JPMorgan Chase, Wells Fargo, and U.S. Bancorp all sport payout ratios in and around the 30% threshold.

The net result is that, for better or for worse, BB&T will be left with share buybacks as the only means to return capital to shareholders.

Discover the three Dow stocks dividend investors need
If you're looking for some long-term investing ideas, you're invited to check out The Motley Fool's brand-new special report, "The 3 Dow Stocks Dividend Investors Need." It's absolutely free, so simply click here now and get your copy today.


Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2727569, ~/Articles/ArticleHandler.aspx, 10/24/2014 11:09:39 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement