Capital One Boosts Dividend 500% After Passing Fed Stress Tests

Capital One Financial Corp. (COF), the worst performer among 24 U.S. lenders in the KBW Bank Index this year, said it would boost its dividend sixfold after submitting its capital plan to the Federal Reserve.

The payout for the first quarter will increase to 30 cents from 5 cents, the McLean, Virginia-based company said today in a statement. After last year’s stress test, Capital One said it would raise $1.25 billion through the sale of its own stock to help fund the purchase of HSBC Holdings Plc’s U.S. credit-card portfolio.

Chief Executive Officer Richard Fairbank, 62, said in January that he expects a “meaningful” dividend increase this year and that the lender initially won’t seek to repurchase shares.

Fairbank has spent more than $28 billion on acquisitions since 2005, including last year’s HSBC deal and the $9.1 billion purchase of ING Groep NV (INGA)’s online U.S. bank, which helped boost deposits by more than $80 billion.

Capital One has dropped 5.9 percent this year, closing at $54.51 today in New York. It’s the only company in the KBW Bank Index (BKX) whose shares have declined this year.

To contact the reporter on this story: Zeke Faux in New York at zfaux@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net

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March 14 (Bloomberg) -- Goldman Sachs Group Inc. and JPMorgan Chase & Co., the world’s biggest trading firms, must submit new capital plans to regulators to address weaknesses in their planning processes found by the Federal Reserve. The central bank approved 14 other banks' proposals. Capital plans submitted by Ally Financial Inc. and BB&T Corp. were rejected, while American Express Co. had to revise its submission to win approval. Julie Hyman and Matt Miller report on Bloomberg Television's "Street Smart." (Source: Bloomberg)