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

Over the next few days, Citigroup, and Wells Fargo will pay their latest quarterly dividends in advance of the CCAR -- their big chance to boost those payouts, along with Bank of America. JPMorgan Chase is to hold its Investor Day; perhaps the bank will indicate the future of its own payout.

Feb 24, 2014 at 11:00AM

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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Eric Volkman has no position in any stocks mentioned. The Motley Fool recommends Bank of America and Wells Fargo, and owns shares of Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

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Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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