Wells Fargo & Co. (WFC) will boost its annualized dividend by 67 percent to 80 cents next year, according to an estimate by Edward Najarian, an analyst at International Strategy & Investment Group Inc.
Najarian, head of bank research at ISI, provided his estimate in a note to clients. The dividend is currently 48 cents, or 12 cents a quarter. Chief Executive Officer John Stumpf said that “more means more” on dividends and buybacks for Wells Fargo investors as the Federal Reserve analyzes the financial strength of U.S. banks. Lenders must submit plans and receive approval from regulators before boosting payouts.
“We want to return more capital to our shareholders,” Stumpf said today in New York at a conference held by Goldman Sachs Group Inc. “Our shareholders have been very patient.” Ancel Martinez, a Wells Fargo spokesman, declined to comment on Najarian’s note.
Stumpf boosted the quarterly dividend at the San Francisco- based bank from 5 cents to 12 cents earlier this year, and the company announced it would repurchase 200 million shares. Chief Financial Officer Timothy J. Sloan told investors Nov. 3 that he was “optimistic” the Fed would let the firm increase the payout and repurchase more stock next year. Stumpf slashed the quarterly payout to 5 cents from 34 cents in 2009.
Najarian was twice named by Institutional Investor as among the best analysts of large-cap banks, and in 2009 he was ranked No. 1 in the major-bank category by Forbes magazine, according to ISI’s website.
Citigroup Inc. (C) and Bank of America Corp. (BAC) are among lenders that may have to temper plans to raise dividends and buy back stock next year as the Fed strengthens capital tests for the biggest U.S. banks.
The Fed has imposed the tougher standards on the 31 largest banks, releasing the criteria for measuring their wherewithal if the economy sours and major trading partners default on their debt. Under the Fed’s Comprehensive Capital Analysis and Review, or CCAR, lenders need to prove they have the capital to withstand a “severe” U.S. recession before they can increase dividends or repurchase shares.
“I don’t have a lot of concerns about the tests from Wells’s perspective,” Stumpf said. “The strength of our balance sheet and strong earnings that we’ve had, we’re going to have that reflected in our CCAR.”
Wells Fargo fell 14 percent this year through yesterday, compared with the 24 percent decline in the 24-company KBW Bank Index. (BKX) Citigroup, based in New York, dropped 37 percent and Charlotte, North Carolina-based Bank of America tumbled 57 percent.
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