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JPMorgan Chase's Strong Q2 Performance and Weaker Outlook

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Part 8
JPMorgan Chase's Strong Q2 Performance and Weaker Outlook PART 8 OF 8

JPMorgan Chase Raises Repurchases Sequentially: Confidence?

Dividend payouts

In 2Q17, JPMorgan Chase (JPM) returned $4.5 billion to shareholders in the form of dividends and repurchases, forming a payout ratio of 64%. In 2Q17, it paid out dividends of $0.50, in line with the previous quarter and compared to $0.48 in 2Q16. As of June 30, 2017, JPMorgan’s book value per share expanded 5% YoY (year-over-year) to $66.05, and tangible book value grew 6% to $53.29.

JPMorgan Chase Raises Repurchases Sequentially: Confidence?

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JPM’s dividend yield stood at 2.17% while its peers provided the following dividend yields.
  • Wells Fargo (WFC): 2.73%
  • Bank of America (BAC): 1.24%
  • Capital One Financial (COF): 1.94%

Together, these banks make up 28.3% of the Financial Select Sector SPDR ETF (XLF).

Repurchases rise sequentially

JPM’s stock buybacks have been consistent and rising despite higher stock prices. In 2Q17, JPMorgan bought back 35 million shares at an average share price of $86.05, compared to 45.8 million shares at an average price of $61.93 in 2Q16. The banking giant is expected to pay out ~$18 billion–$22 billion to shareholders in 2017, which is ~6% of the total capitalization compared to $15 billion in the prior year. In 1Q17, JPMorgan repurchased 32.1 million shares at an average price of $88.14.

Commercial banks have engaged in higher repurchases to offset lower dividend payouts, which have been lower in recent quarters due to stress tests. As the Trump administration pushes for lower regulations in the financial sector through the Choice Act, commercial and investment banks can see their payouts rise alongside improving financials at least in the medium term due to fewer strict requirements for augmenting tier 1 capital.

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