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Will This Week See the Last of the Low Bank Dividends?

This week, we might just witness the end of micro-dividend payments from the nation's macro-sized banks. Between now and Saturday two of the big four lenders -- Citigroup (NYSE: C  ) , and Wells Fargo (NYSE: WFC  ) -- will hand out their latest distributions. These are the final payouts before next month's release of the annual Comprehensive Capital Analysis and Review (CCAR, for those running out of breath), a key component of the Federal Reserve's annual series of stress tests for major banks.

Those financial institutions are required to submit their capital distribution plans, including dividends, and these can be approved, suggested for modification, or turned down by the Fed. Scuttlebutt in the market has it that Bank of America  (NYSE: BAC  )  and Citi will both push for a big lift of the $0.01 per share payout each currently dispenses. Of the two, the former is more likely to do so given its strong recent fundamentals, combined with Citi's propensity to favor share buybacks over dividends. Still, investors love getting payouts and both banks could use a little shareholder affection at the moment.

As for Wells Fargo, its brain trust strongly indicated last year that it would seek to raise its quarterly payout of $0.30 per share. That would provide a fine opportunity for the bank to crank up its yield, which currently stands at a not-bad 2.6%.

Outside of dividend payments, bank investors like everyone else will be anticipating the second reading of Q4 2013 gross domestic product, scheduled to be released on Friday. Expectations are that the figure will be revised downwards to 2.5% growth on an annual basis from the previous reading of 3.2%, due to the terrible, economy-hammering weather at the end of last year.

That release will come a day after Fed chief Janet Yellen trundles back to Capitol Hill to testify before the Senate's banking committee,in a performance that will be watched and parsed and put under the microscope by the market. But we shouldn't expect anything surprising, given that in previous appearances she said nothing to indicate that her Fed will stray far from the policies implemented by predecessor Ben Bernanke.

It's likely that at least as much attention will be paid to JPMorgan Chase (NYSE: JPM  ) CEO Jamie Dimon's remarks tomorrow when he gives one of the presentations for the bank's Investor Day. Events include a question and answer session and, given that Dimon got a big raise in compensation for 2013 while the bank can't seem to escape lawsuits and government probes, some of those queries are likely to be penetrating. Hopefully the answers will be revealing to some degree.

JPMorgan, by the way, also pays a dividend (the latest distribution was $0.38 per share, for a Wells Fargo-ish yield of 2.6%). Might Dimon or one of the bank's top dogs say a word or two about where that payout is heading, going into the upcoming CCAR? Dimon's a competitive guy, so we shouldn't be surprised if his bank decides to keep up with the Joneses and lift its dividend. Higher payouts, after all, might turn out to be a happy trend in the sector going into the immediate future.

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Financial titans like Jamie Dimon are smart, and they realize that dividend stocks as a group handily outperform their non-dividend paying brethren. The reasons for this are too numerous to list here, but you can rest assured that it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.



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Eric Volkman

Eric has been writing about stocks and finance since the mid-1990s, when he lived in Prague, Czech Republic. Over the course of a varied career, he has also been a radio newscaster, an investment banker, and a bass player in a selection of rock and roll bands. A native New Yorker, he currently lives in Los Angeles.

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8/28/2015 4:02 PM
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