Wells Fargo & Company
) enhanced its quarterly common stock dividend by 14% to 25 cents
per share. The dividend will be paid on Mar 1, 2013 to
shareholders of record as of Feb 1, 2013.
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This marks Wells Fargo's 3rd consecutive year of dividend
increase, reflecting its commitment to return value to
shareholders with strong cash generation capabilities. Prior to
this, the company had increased its dividend by 83% (from 12
cents to 22 cents per share) in Mar 2012.
The dividend increase is part of Wells Fargo's 2012 Capital Plan.
The company's capital plan, including dividend increase and other
capital actions, was submitted to the Federal Reserve in Jan
2012. Since the Fed gave its capital plan a green signal, the
company increased its quarterly dividend.
Moreover, Wells Fargo has submitted its 2013 Capital Plan earlier
this month to the Fed, and it is under review. This plan also
seeks permission for an increase in capital distributions. The
company's decision to hike dividend depicts its strong capital
position and increases the possibilities of clearing the recent
For Wells Fargo, its business model is an impressive one that
allows it to generate sufficient capital, grow its balance sheet
and help return capital to shareholders. Moreover, we believe
that strategic acquisitions will expand the company's business
and improve its profitability over time.
The company's diversified revenue stream, strong capital position
and expanded business through acquisitions, along with expected
expense management as well as improved credit quality, will also
support its profit figures. Yet, a sluggish economic recovery
coupled with regulatory issues might limit its growth to some
In 2012, the company paid roughly $4.7 billion in dividends to
the common shareholders. Moreover, it repurchased common stock
worth about $3.9 billion during the year. Cash and due from banks
exiting the year were $21.9 billion.
Wells Fargo currently carries a Zacks Rank #3 (Hold). We believe
that the announcement of a dividend increase will augur well for
the company and help boost shareholders' confidence, which might
lead to positive estimate revisions. This, in turn, could cause
an upgrade in the Zacks Rank.
Among other companies in the same sector,
) also increased capital redeploying efforts through dividend