JP Morgan (
Wells Fargo (
announced upcoming dividend increases for the 2
quarter of 2014. While the yields remain modest, these
increased dividends could be a sign of even more growth to
JP Morgan will raise its annual dividend by 5.3% to $1.60 per
is tomorrow, so you have to act right now to take advantage of
this dividend increase.
Wells Fargo's dividend hike is more significant. In
early May the company will increase its annual dividend by 16.7%
to $1.40 a share. Interestingly, that increase puts
Wells Fargo's annual dividend
of what the bank was paying when it had to cut its dividend
during the financial crisis.
In addition to these dividend hikes, both banks are
aggressively repurchasing shares.
JP Morgan could repurchase $6.5 billion worth of shares by the
end of the first quarter of 2015. The overall plan means
that JP Morgan would return$12.5 billion to investors in the next
This is JP Morgan's highest payout since the economic downturn
of 2008, and just less than the record payout of $13.2 billion in
2007. At current market prices, the repurchase plan should reduce
the number of JP Morgan's outstanding shares by almost 3%.
Wells Fargo is also increasing buyback of its stock.
The bank's Board of Directors has approved the buyback of an
additional 350 million additional shares. This buyback
should reduce the number of Wells Fargo's outstanding shares by
JP Morgan's P/E ratio is currently 13.99. Wells Fargo
sports a P/E ratio of 12.76. Compared
with the 19.80 P/E ratio of the S&P 500, these banks are both
clearly trading at a significant relative discount. This
fact coupled with their dividend increases and stock
buybacks make both banks attractive investments.
Clearly big banks like JP Morgan and Wells Fargo have been a
polarizing investment topic since the financial crisis of 2008,
but there is a lot of value to be had here.
The combination of inexpensive stock,
, and aggressive share buybacks could be a recipe for strong
profits in 2014.
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