After passing the stress tests imposed by the Federal reserve, several financial institutions announced dividend increases to their shareholders. I have listed the companies below, along with their dividend increase, streak of annual dividend increases, and historical dividend growth.
Bank dividends in general are more cyclical than your typical dividend growth stock in the staples sector for example. Financial institutions are exposed to the up and down cycles of the economy, which is why dividends are more prone to a cut during a recession. For example, most large banks in the US cut dividends around the time of the 2007 - 2009 financial crisis. Many, like Bank of America, are still paying less than their 2007 dividend, while others like US Bank have already exceeded them.
However, during a long period of prosperity, banks can grow profits and dividends to investors. This had been the case prior to 2007, as many banks like Bank of America, US Bank and Wells Fargo had raised dividends for decades.
During the Covid-19 crisis however, only Wells Fargo (WFC) cut dividends. This was due to problems related to the bank and its scandals from the past few years. While many of the large banks were unable to boost dividends, they didn't cut them either. As the economy improved, these institutions managed to bounce back and share in the prosperity with shareholders.
The financial institutions that announced dividend hikes after passing the Fed Stress Tests include:
Bank of America (BAC) hiked its quarterly dividend by 17% to 21 cents/share. The bank has increased dividends for 8 years in a row. The ten year annualized dividend growth is 33.50%.
Bank of New York Mellon (BK) hiked its quarterly dividend by 10% to 34 cents/share. The company has increased annual dividends for 11 years in a row. The ten year annualized dividend growth is 13.20%.
Goldman Sachs (GS) hiked quarterly dividends by 60% to $2/share. Goldman has increased dividends for 10 years in a row. The ten year annualized dividend growth is 13.60%.
JPMorgan Chase (JPM) announced its plans to boost the quarterly dividend by 11.10% to $1/share. The bank has managed to boost annual dividends for 11 years in a row. The ten year annualized dividend growth is 33.50%.
Jefferies Financial Group (JEF) hiked its quarterly dividend by 25% to 25 cents/share. The company has raised dividends for 5 years in a row. It has managed to grow dividends at an annualized rate of 9.10% over the past decade.
Morgan Stanley (MS) announced its plan to double quarterly dividends to 70 cents/share. The bank has managed to increase dividends for 8 years in a row. The ten year annualized dividend growth is 21.50%.
PNC Financial (PNC) plans to boost its quarterly dividend by 9% to $1.25/share. The company will also start a $2.9 billion share buybacks. The company has managed to increase quarterly dividends for 11 years in a row. The ten year annualized dividend growth is 27.70%.
State Street (STT) raised its quarterly dividend by 10% to 57 cents/share. The company has managed to increase quarterly dividends for 11 years in a row. The ten year annualized dividend growth is 48.50%.
Truist Financial (TFC) hiked its quarterly dividend by 7% to 48 cents/share. The company has managed to increase quarterly dividends for 11 years in a row. The ten year annualized dividend growth is 11.60%.
US Bank (USB) raised its quarterly dividends by 10% to 46 cents/share. The company has managed to increase quarterly dividends for 11 years in a row. The ten year annualized dividend growth is 23.70%.
Wells Fargo (WFC) plans to double its quarterly dividend to 20 cents/share. The bank also approved an $18 billion buyback starting in Q3, 2021. The bank is still subject to the Fed's asset cap as a result of the bank's fake account scandal in 2016. This is the first increase since Wells Fargo cut dividends in 2020.
Bank OZK (OZK) hiked its quarterly dividend by 1.80% to 28.50 cents/share. It is one of the smaller banks, which had kept raising dividends every quarter for several years now. The new dividend is 4.58% higher than the dividend paid during the same time last year. The ten year annualized dividend growth is 20.76%.
The one notable exception to the wave of dividend increases is Citigroup (C), which plans to keep dividends unchanged at 51 cents/share.
I obtained the following long-term dividend chart from ycharts.com: (Source)
- Financial Stocks for Dividend Investors
- My Take On Covid-19 Dividend Cuts
- Which Bank will be next? Follow the dividend cuts