Morgan Stanley, owner of the world’s largest brokerage, will seek to boost its dividend yield to about 2 percent and eventually return all of annual earnings to investors, Chief Executive Officer James Gorman said.
“An 80 percent to 100 percent payout on just the earnings from wealth and investment management suggests an annual dividend at two or three times our recently increased level,” Gorman said today during a conference call to review first-quarter results. Gorman said the yield should be at least commensurate with the 2 percent level of the Standard & Poor’s 500 Index.
Morgan Stanley doubled its quarterly dividend to 10 cents and set plans for a $1 billion buyback after passing Federal Reserve stress tests in March. Gorman, who spoke after the New York-based investment bank reported a 56 percent increase in first-quarter profit, said the firm will “add meaningfully to our capital requests in future years.” At current prices, the stock yields about 1.3 percent.
“Share buybacks will make up the difference between dividends and the total payouts, which we intend to drive to 100 percent of firm earnings over the next several years,” Gorman said, adding that regulators would have to approve.