After recovering from the chaos during the financial crisis, Wall Street banking gargantuan JPMorgan Chase & Co. emerges as one of the firmest financial institutions in the sector. The JPM stock has soared at a yearly pace of over 20% per year since 2009, concluding a 55% gain over the past 12 months.
JPMorgan has restored and raised its dividend to the point that it currently surpasses pre-crisis levels, and investors are eager that the bank will reward shareholders once more in 2017 by increasing its dividend again. The question now is: will these investor hopes come true?
The current dividend stats of JPMorgan are as follows:
· Current Quarterly Dividend per Share: $0.48
· Current Yield: 2.3%
· Number of Consecutive Years with Dividend Increases: 6 years
· Payout Ratio: 32%
· Last Increase: July 2016
JPMorgan has reliably given dividend investors significant yields, despite quarterly payment growth not being the priority during its history. For example, following a dividend raise in 2001, the Wall Street bank kept its payout unchanged until 2007, even if it was enjoying substantial success due to solid conditions in the housing market and strong economic growth. But most investors did not have much to complain because JPMorgan’s dividend yield maintained itself in a 2.5% to 4% range throughout that interval. The stock price continually grew during much of that time span as well.
Only in year 2009 did the banking giant fall at the hands of the financial crisis, cutting its dividend by 87% to a meager $0.05 per share. However, unlike many of its peers, JPMorgan regained its financial footing quickly: In 2011, the bank acquired approval from the Federal Reserve to increase its dividend after passing stress test, and it immediately quintupled its payout to $0.25 per share.
In succeeding years, JPMorgan kept up the pace of its dividend growth— with surges of 20% in 2012 and 27% in 2013– before witnessing its growth rate slow down to the 5% to 10% range.
JPMorgan's dividend increases have come as the Wall Street banking giant has become stronger and financially healthy than ever. The combination of retail and investment banking has been profitable during the bull market in stocks and rebound in the housing market, and growing profits have aided to support the dividend.
Worthy to note is that dividends haven't been the only method that JPMorgan Chase has returned capital to stockholders in its history. Stock buybacks were also key players. For instance, in 2011, JPMorgan also committed to repurchasing up to $15 billion in stock to go along with its dividend growth. Since then, the financial establishment has certified related buybacks and used them to repurchase shares on a regular basis.
Will the bank raise its dividend?
CEO Jamie Dimon has stated that he prefers dividends to buybacks and expects that JPMorgan can push its payout ratio toward 50% of earnings in the future.
As Dimon said in a recent conference, “I think buying back stock is giving cash to my leaving shareholders. I care much more about the remaining shareholders. ... It might be better to give you a special dividend.”
However, investors should be reminded that JPMorgan's freedom to assemble its capital strategy is still restricted. Many are expectant that the new Trump administration will find ways to make regulation less difficult, and that could possibly contain the series of stress tests that JPMorgan and its banking peers have to go through every year in order to have their capital plans permitted. Until that happens, though, JPMorgan might have to wait longer than it otherwise would in order to completely reestablish its dividend to the level it prefers.
With the bank's recent success, investors should expect another dividend raise from JPMorgan Chase this 2017, likely coming near mid-year and possibly adding another $0.04 to $0.05 per share to the quarterly payout. Additionally, if growing interest rates bring better and bigger profits, then investors could enjoy faster share growth, both this year and the years to come.
In the last session, the JPM stock ended with a $0.37 gain or 0.44% to $83.67. The stock recently dropped from its all-time record after bank stocks sold off following Trump's comments on the dollar and House GOP's border-adjustment tax plan. On the Dow Jones Industrial Average, JPMorgan performed the worst last Tuesday.
The bank sector performed excellently post-presidential election, as indicated on the given chart beginning mid-November 2016. JPMorgan had a hefty jump from $70.00 to $79.53 beginning November 8 to November 14.
Additionally, the US Supreme Court rejected an appeal by Bank of America Corp., Citigroup Inc., and JPMorgan Chase & Co., to stop antitrust lawsuits alleging a conspiracy to rig Libor by a number of big banks.
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