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A 360 Degree View of JPMorgan Chase’s Dividend

By John Maxfield - Sep 16, 2015 at 9:12AM

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How does the nation's biggest bank by assets allocate its earnings?

One of the many reasons to own JPMorgan Chase's (JPM 0.89%) stock is the size, reliability, and future growth potential of its dividend. The charts below capture this opportunity from three different perspectives.

The first chart shows the history of JPMorgan Chase's quarterly dividend per share:

There are two things to take away from this chart. The first is the obvious interruption caused by the financial crisis. Following the failure of Lehman Brothers in 2008, the majority of big banks in the United States slashed their dividends in order to accumulate capital that could then be used to offset credit losses. But while these cuts still haunt banks like Bank of America and Citigroup, neither of which have been able to scale up their dividends to anywhere near their 2007 levels, JPMorgan's quarterly payout has more than made up for the temporary reduction. It paid out $0.38 per share each quarter prior to the crisis. Now, it pays out $0.44 per share.

Second, and more importantly, the chart shows that JPMorgan Chase has consistently increased its quarterly payout -- with, of course, the financial crisis as the principal exception. This is good news for shareholders, as a continuation of this trend will fatten investors' pockets for years to come.

The second chart illustrates JPMorgan's payout ratio, the percentage of net income it distributed to shareholders in 2014:

Most banks strive to pay out a third of their earnings to shareholders by way of dividends, leaving the remaining two-thirds to be split roughly evenly between retained earnings and share buybacks. JPMorgan nearly hits this on the head when it comes to dividends. In 2014, it distributed 35% of its earnings to shareholders.

Finally, the third chart compares JPMorgan's dividend yield -- its annual payout divided by its share price -- to its competitors:

JPMorgan Chase falls right in the middle of the pack in this regard. Its current dividend yield is a respectable 2.6%, less than companies like Wells Fargo, but well above the other two too-big-to-fail banks, Bank of America and Citigroup.

In sum, if you're on the hunt for a great bank stock that seems likely to raise its dividend consistently over the coming years without sacrificing too much yield today, you could do a lot worse than JPMorgan Chase.

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