EPS is over $.80, TARP is repaid, the div is only $.20 yielding less than 1%. Its time to raise the dividend. That would drive the stock price up - which creates currency to buy other banks in a stock-for-stock deal. Thoughts?
Why does USB need to create currency to buy other banks via stock deals? The FDIC comes knocking on their door every Friday giving away assets for pennies on the dollar...
If USB wants to create long term shareholder value without raising the dividend (and possibly having to cut it again in the near term if the market goes south) they should engage in a share repurchase program. This way USB is not committed to a dividend and still creates tremendous shareholder value...
USB has a mandate to return 80% of earnings back to shareholders in the form of dividends / share repurchases and I sense one in on the horizon...
back to old div. ?
hey guys -
isn't it time to put some money into
the "bonus for exec's" XMAS - pot.
after all -
some of their Mercedes are almost a
and sweetie pie hasn't had a new diamond for a year now -
and the kids private school rate went up again.
gimme a break - JEEZ -
my "girl on the side" wants some
new digs - a $10,000 mo. apartment.
and don't forget inflation !!
Two $Mill. don't go to far anymore.
They mentioned that a quarter ago and JPM sounds ready. USB hedged a bit on capital requirements when last quarter they said they would look at it in the 4th quarter.
May not be until the 2nd or 3rd quarter now. I was fairly confident they would anounce it in December but it's all about capital still and I don't think you can have enough of it until the regulators and congress get done reinventing the wheel.
Hmmm. This article and others reported that USB did repay the TARP, but (thanks to your post) I see other contradicting articles.
Looks like they have not repaid it yet.
Companies that pay dividends perform much better then those who do not. The reason seems to be companies that have lots of cash tend to waste it on lavish parties mergers ect. Apparently companies that pay dividends have less money for managers to blow on lousy projects.
Companies that buy back shares tend to do it at the height of a bubble and end the programs during recessions. I agree buybacks are for the birds.
It's interesting to read all the different thoughts on the dividends and their possible return, isn't it?
I will certainly ponder your thoughts about the non-payment of TARP money by some of the banks and that influence on dividend re-instatement.
I may be wrong, but wasn't USB's yield higher than that of JPM when it came to dividends? ( I know the amount they paid was larger.) I don't know how that fits in with the regional banks' dividends returning earlier than the big banks; on the other hand, you may be considering USB as one of the "big banks" when you talk about this.
Thanks for this more-detailed explanation of the dividends--their cuts and their potential returns.
I had also made the observation (in my own mind) about the difference in the banks that dropped to one cent per quarter, vs. 5 cents per quarter.
And you are absolutely right about the mutual funds and pension plans not wanting to or not being able to hold onto non-dividend paying stocks. Many of them hold so many hundreds of thousands of shares that the market would have been swamped if they had suddenly been "forced" to dump all of their bank stocks. (I do wonder, however, how long they will continue to hold big blocks of these stocks if the dividends aren't increased at least slightly by next year. There are many stocks in today's marketplace that have not only continued to maintain their dividend; some have even increased them. I would imagine that the big holders like Vanguard and Fidelity, etc., have been in conversation with the bank CEO's and CFO's about this very topic!)
I agree totally that we will not see an immediate increase to the old levels. It would not surprise me if they took 5 years or more to raise dividends in small increments--just to be safe.
Unfortunately, the bank CEO's are not taking equal "hurt" in this process. The salaries and bonuses continue. I'm sure you saw the article posted recently on the high incomes of bank CEO's who took TARP monies.
I'd love to continue this conversation with you, but I just got home from a class (ironically entitled "The U. S. Economy after the Crisis,") and now I have to leave for a meeting.
Thanks again for your insights and details!
I think a lot of us want to see the dividend return, but we recognize that they are still building capital and there is a bit more to happen in the economy before the banks want to return to "yesterday."
Interestingly, I got an email earlier this morning from a lady in one of my clubs who has a very large holding in USB. Her parents held a lot of a small-town Iowa bank stock in the 1920's and '30's and the stock just kept growing, and growing, and growing. She said that her broker told her that it would be one more quarter before Davis said anything about increased dividends. She is wanting the dividend to return, too! They were her primary source of income.
You are looking at things only from PPS point of view, but there are other factors. Ultimately if the company doesn't distribute dividend, it probably uses money for:
- pay increases to attract and retain top talent
- share back-purchases to raise value of company shares
- invest in growth
While share back-purchase is almost identical to paying dividends the points 1 and 3 may have different results. Those options are riskier, but they may bring substantial value for shareholders.
I agree that paying dividend should make little impact on share price, because it's share of earnings coming to the shareholders directly in cash form. It is somewhat more convenient to some investors, since they don't need to trade stock to realize their profits. I read somewhere that paying dividend lowers the share price because of lower EPS and admittance of limited growth potential. Tech companies don't usually pay dividend, since they have to invest in R&D and their margins are very high.