Following the conditional approval its capital plan in Mar 2013 by the Federal Reserve, JPMorgan Chase & Co. (JPM) announced a 26.7% hike in its quarterly dividend. This pegged the company’s quarterly dividend at its highest level.
JPMorgan declared a quarterly cash dividend of 38 cents per share. The dividend will be paid on Jul 31 to shareholders of record as of Jul 5.
The company used to pay this dividend amount prior to the economic crisis. However, with the financial meltdown, JPMorgan had reduced its quarterly dividend to 5 cents per share in second-quarter 2009 and had taken bailout money from the government to stabilize its financials.
However, following the approval of its capital plan by the Fed in 2011, JPMorgan raised its quarterly dividend five fold to 20 cents per share. Further, last year, it hiked its dividend 50% to 30 cents and maintained the same till first-quarter 2013.
In addition, JPMorgan’s 2013 capital plan includes a share repurchase program worth $6 billion, 60% lower than that of the last year. The company intends to complete the buyback of shares by the end of first-quarter 2014, through either the open market or privately-negotiated transactions.
Apart from JPMorgan, other banks that increased their dividends after the Fed’s sanction include SunTrust Banks, Inc. (STI), Capital One Financial Corporation (COF) and Zions Bancorp. (ZION). Capital One hiked its dividend by 500% to 30 cents per share, SunTrust by 100% to 10 cents and Zions by 300% to 4 cents.
We believe that the latest jump in JPMorgan’s dividend reflects its commitment to return value to shareholders through its strong cash generation capabilities. With the company clearing the stress test and announcing new capital deployment plans, it will expectedly be able to withstand another financial crisis and continue to boost shareholders’ value.
Currently, JPMorgan carries a Zacks Rank #2 (Buy).
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