U.S. Markets open in 3 hrs 22 mins
  • S&P Futures

    4,621.50
    +55.25 (+1.21%)
     
  • Dow Futures

    34,771.00
    +314.00 (+0.91%)
     
  • Nasdaq Futures

    16,369.25
    +218.75 (+1.35%)
     
  • Russell 2000 Futures

    2,245.30
    +48.00 (+2.18%)
     
  • Crude Oil

    69.30
    +3.12 (+4.71%)
     
  • Gold

    1,787.50
    +11.00 (+0.62%)
     
  • Silver

    22.92
    +0.10 (+0.46%)
     
  • EUR/USD

    1.1338
    -0.0001 (-0.0113%)
     
  • 10-Yr Bond

    1.4430
    0.0000 (0.00%)
     
  • Vix

    23.68
    +6.57 (+38.40%)
     
  • GBP/USD

    1.3321
    +0.0020 (+0.1479%)
     
  • USD/JPY

    113.4080
    +0.2280 (+0.2014%)
     
  • BTC-USD

    57,021.67
    +59.36 (+0.10%)
     
  • CMC Crypto 200

    1,468.15
    +0.22 (+0.01%)
     
  • FTSE 100

    7,157.98
    +98.53 (+1.40%)
     
  • Nikkei 225

    27,935.62
    +113.86 (+0.41%)
     
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Dividends and buybacks back on track

In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Brian Cheung joins Myles Udland and Brian Sozzi to discuss the dividend hike after the Fed ruled that banks passed the stress test and are allowed to resume dividends and buybacks after facing restrictions during the COVID-19 pandemic.

Video Transcript

MYLES UDLAND: All right, let's turn our attention now to some news yesterday out of the Federal Reserve. Latest stress test results out, and we see announcements from banks on their capital return plans. Yahoo Finance's, Brian Cheung, joins us now for the latest on that.

And Brian, we've seen a lot of preference for income from investors over the last several years, certainly with yields this low. And I guess congrats to the financials on now getting into this mix.

BRIAN CHEUNG: Yeah, well, we have to rewind to last week's announcement on Thursday from the Federal Reserve that the largest banks had gotten a clear bill of health from the regulator regarding their capital positions. The Fed does this normal stress test every year, but of course, last year was a very unusual year with the pandemic. And the Federal Reserve, at the time last year, had put restrictions on the amount of dividends and share buybacks that the banks could execute because of the concern over whether or not the banks were able to absorb the shock that was the COVID crisis.

Now, the Federal Reserve said that as a result of the clean bill of health, everyone passing the stress test, that it would be taking off those training wheels and that the banks would not have those additional restrictions on dividends and buybacks as of this Thursday, which means floodgates are open. And we saw a number of large banks announce after the market closed yesterday that they'd be paying out more dividends and also executing more share buybacks. The four banks that you see ahead of you announced an extra $2 billion in dividends next quarter, because again, they were no longer restricted from not being able to raise their dividends.

And when you take a look at a bank by bank breakdown, you can see there were some banks that got more aggressive about the amount that they're paying out. When you take a look at Wells Fargo, for example, they doubled their dividend from $0.10 to $0.20. So, did Morgan Stanley, doubling from $0.35 to $0.70. Of course, you want to pay attention to the largest bank in the United States, JPMorgan Chase raising their dividend from $.99 to $1.

So, it doesn't matter what bank you're looking at specifically, yes, some may have paid out more than the others, but if you are a large bank shareholder right now, you're probably feeling pretty good about the increase in capital now that the Federal Reserve has taken off those training wheels. And again, worth noting that a lot of the people watching this space.

Like Gerard Cassidy over at RBC, a friend of the Yahoo Finance programming, saying that any excess capital that cannot be redeployed into the growing companies, whatever they want to grow their balance sheet for, or extending it into new types of business lines either organically or through acquisition, will ultimately end up back into the hands of shareholders, which means that, guys, it's not just this coming quarter. It might be coming quarters and also years as well of increased capital distribution.

BRIAN SOZZI: Brian, real quickly. Morgan Stanley doubled its dividend. It's the third trending ticker on our site. Any sense on why they raised their dividend the most?

BRIAN CHEUNG: Oh, not necessarily, but you can kind of glean through just the press releases and everything that the companies that were able to really do well off of their trading income during the last year were the ones that were able to have enough profits through a very rough and obviously flat yield curve year of 2020 to have the type of position to be able to pay out that capital back to shareholders.

So, you take a look at Morgan Stanley, you take a look at Goldman Sachs. Goldman Sachs, by the way, they didn't double their dividend, like Morgan Stanley and Wells Fargo, did but going from $1.25 to $2 is no small change at all. And I think that that lends itself a lot to the way that their trading desks perform, not just on fixed income, but on currencies, also on equities. Those two banks specifically doing extremely well through the crisis.

Now, of course, the question is whether or not, with the volatility not as high as it was in the depths of the pandemic, whether or not that can continue. It seems like, as the yield curve maybe steepens a little bit more, some of those more commercial bank and community banking-related businesses, just loan pipelines lending out and then taking deposits, that might end up being the winners in the coming quarters. At least for right now, that might be the reason why Morgan Stanley and Goldman Sachs were able to pay out so much.

MYLES UDLAND: All right, Yahoo Finance's, Brian Cheung, with the latest windfall heading towards financial investors over the coming quarters. Brian, thanks for that update.