When the U.S. economy plunged into full-on crisis mode back in 2008, big banks were among the first to take the hit. Those that survived the initial impact responded by slashing dividends to mere pennies a share as they struggled to realign their balance sheets. But in the years since, the financial sector has staged a swift recovery, affirmed by the robust bank earnings that have begun to file in.
JP Morgan got things off to a strong start, reporting a 47% rise in profits for the last quarter of 2010. And those numbers have firm CEO Jamie Dimon feeling optimistic about 2011. He expects the bank to be able to raise dividends to as much as $1 per share by Q2, provided they pass the Fed's mandatory stress test.
And Dimon is confident they will, asserting that: "We will be adequately capitalized even in a stressed situation."
Wells Fargo is expected to follow Morgan's lead, with CEO John Stumpf concurring that, "It's high time that we provide a return on your investment." And if other banks' earnings are as strong as projected, look for them to follow suit, according to Gerard Cassidy, banking analyst at RBC Capital Markets.
This, coupled with "improved credit metrics and stronger capital levels" more than likely means an all-around increase in dividends, and should make for a strong year in financials stocks.
Company health often goes hand-in-hand with dividend increases, as Dimon's and Stumpf's comments would appear to suggest. So if you're wondering which financial stocks to start analyzing, you may want to try and find companies that have a track record of raising dividends. For if they managed to keep up the increases through the hard times, it's a good sign that they'll able to continue the trend in the future. (Click here to access free, interactive tools to analyze these ideas.)
Here's a list of financial stocks that have raised dividends faster than their competitors over the past five years. Dividend data and industry comps sourced from Reuters.
|
Company |
Dividend Yield |
Dividend Growth Over Last 5 Years |
|---|---|---|
|
T Rowe Price |
1.63% vs. industry average at 2.4% |
20.11% vs. industry average at 5.83% |
|
Banco Santander |
6.4% vs. industry average at 1.73% |
12.5% vs. industry average at 8.32% |
|
ICICI Bank Limited |
1.12% vs. industry average at 1.73% |
9.86% vs. industry average at 8.32% |
|
MOODY'S CORPORATION |
1.59% vs. industry average at 1.82% |
21.98% vs. industry average at 7.86% |
|
Mitsubishi Financial |
2.6% vs. industry average at 1.73% |
12.89% vs. industry average at 8.32% |
|
ACE |
2.18% vs. industry average at 3.14% |
7.73% vs. industry average at 2.12% |
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research. Note: The numbers on top of items represent the forward P/E ratio, if available.
Kapitall's Eben Esterhuizen and Alicia Sellitti do not own shares of any companies mentioned.
