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Dividend Increase 2014
Big Bank CEO: No Dividend Increase in 2014
by John Maxfield, The Motley Fool Nov 17th 2013 9:01AM
Updated Nov 17th 2013 9:02AM
If you're a shareholder of BB&T and were hoping it'd raise its dividend next year, I have bad news for you. According to its CEO Kelly King, the mid-Atlantic-based bank isn't planning on doing anything of the sort.
"There is still this downward pressure ... in terms of dividend payout rates," Kelly said on the company's most recent earnings call. He then went on to explain that it will be "challenging to raise dividends at a high level because ... we already have a very high level in terms of payout and dividend yield."
What Kelly is referring to when he mentions "downward pressure" is the Federal Reserve-administered comprehensive capital analysis and review process, or CCAR, which gives the central bank an up-or-down vote on a bank's capital plans.
In this year's CCAR instructions, the Fed didn't mince words, saying that "requests that imply common dividend payout ratios above 30% of projected after-tax net income available to common shareholders in either the BHC baseline or supervisory baseline will receive particularly close scrutiny."
Herein lies BB&T's dilemma.
As you can see in the chart above, it distributed nearly 54% of its earnings to shareholders over the last 12 months. This is more than any of its close competitors. For instance, JPMorgan Chase, Wells Fargo, and U.S. Bancorp all sport payout ratios in and around the 30% threshold.
The net result is that, for better or for worse, BB&T will be left with share buybacks as the only means to return capital to shareholders
LOL....how true. There were investors saying this in the late 90s and they could have bought US Treasuries and done better than owning this stock for 15 years.
Would someone try to explain just what real incentive Kelly King, BOD and executives have to really increase the share price? In my opinion they get big bucks regardless of what the share price is and or does. Check back to about 1998 or so and I think you will find the share price at that time was much higher than it is today. In the meantime the BOD and the executives have been getting paid like they were doing a good job. Just have many times do the shareholders (owners) have to pay to plow the same field over and over? Share price below several years ago, dividend has been cut yet the executives are still making lots of money. Is this just the same good old boy network at work?
There is not much cost reduction either....see the worsening efficiency ratio. Information Technology (IT) is one of the biggest cost there...look at job boards for tech resources in NC...BBT will be on top!
I love how they state that mortgage has gone down over 45% due to market. It is because a ton of loan officers left BB&T to go to other banks.
What am I missing? This looks like a complete mess of a quarter. Sure they are cutting cost. But the shrinkage in the top line is very concerning. How long does a management group get to figure out how to make a reasonable return on a great franchise?
• A dividend of $0.23 per common share
• A dividend of $365.625 per share (equivalent to $0.365625 per depositary share or 1/1,000th interest per share) on BB&T's Series D Non-Cumulative Perpetual Preferred Stock (NYSE:BBT PrD)
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You might want to look how the recommendation in that 8/26 post has worked out. Compare chart from 8/26 to today shows FBP down more than 11% but BBT down not quite 5% for that one month period.
Sentiment: Strong Buy