J.P. Morgan Raises Weak Dividend, Pleases on Buyback & Stress Test (JPM, BAC, C, WFC)

Banking, finance, and taxes

Published: March 13, 2012 3:17 pm

Last Updated: April 28, 2020 12:21 am

J.P. Morgan Chase & Co. (NYSE: JPM) has raised its dividend as we expected. Good news on the surface, but a true disappointment in reality. The bank has declared a quarterly dividend of $0.30 per common share. This represents only a $0.05 per quarter increase. Investors have to hope that the buyback counteracts this news because it is a disappointment even though the shares have risen since the news dropped. By our take, the bank could have risen that to $0.40 and this may temper some expectations about bank dividend hikes. The flip-side is that the buyback plan is larger than the market was expecting.

The dividend is payable on April 30, 2012 to stockholders of record at the close of business on April 5, 2012.

What is not a disappointment is that the bank just authorized a new $15 billion common stock buyback program. Of the total amount, $12 billion is approved for the year 2012 and up to an additional $3 billion is approved through the end of the first quarter of 2013.

Jamie Dimon noted, “We are pleased to be in a position to increase our dividend and to establish a new equity repurchase program. We expect to generate significant capital and deploy that capital to the benefit of our shareholders…”

At a minimum, the bank intends to purchase roughly the same amount of shares that it issues for employee stock-based incentive awards and it intends to repurchase equity only when it generates capital in excess of what it needs to fund organic growth.

As far as the stress test details: “The Federal Reserve has informed the Firm that it completed its 2012 Comprehensive Capital Analysis and Review (“CCAR”) and that it did not object to the Firm’s proposed capital distributions submitted pursuant to CCAR.”

24/7 Wall St. expected the Stress Test report to come late in the week, but we expected the dividend gains to be much larger than this. The investors are focusing on the share buyback because the stock is up 4.7% at $42.52.

Citigroup, Inc. (NYSE: C) is up almost 5% at $36.01; Bank of America Corporation (NYSE: BAC) is up 3.2% at $8.24; and Wells Fargo & Co. (NYSE: WFC) is up 3.5% at $32.61.

JON C. OGG

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