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Will Dividends Please Wells Fargo’s Investors Worried about Scandals?


Dec. 4 2020, Updated 10:52 a.m. ET


Wells Fargo (WFC) has increased its dividends annually. In June, the Federal Reserve approved Wells Fargo’s capital plans after it found that the bank could keep lending in a severe economic downturn. This clears the way for Wells Fargo to reward investors through dividends and share repurchases.

The bank (XLF) reiterated its previously disclosed $0.38 dividend and didn’t give any update on share repurchases. On April 26, 2016, the company increased its quarterly common stock dividend to $0.38 per share from its previous $0.375 per share. For more on this topic, please read Did Wells Fargo Pass the Fed’s Stress Test?

The company’s dividend payout ratio of 35.8% is slightly lower than the cap of 40%. Wells Fargo will continue to pay its investors the current dividend of $0.38 per share. Its dividend yield of 3.7% is the highest among its peers (XLF).

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Such high yields, coupled with the bank’s strong balance sheet and profitability, are its greatest competitive advantage. In the two-year period between 2Q14 to 1Q16, the company returned $34 billion to shareholders, outpacing its peers JPMorgan Chase (JPM), Bank of America (BAC), and Citigroup (C).

Wells Fargo added 350 million shares to its share repurchase authorization in January 2016, reflecting the company’s confidence in its current valuations as well as its long-term prospects. For more information, please read Wells Fargo: Capital Return Outpaces Its Peers.

In the third quarter, Wells Fargo returned $3.2 billion to its shareholders in the form of dividends and stock repurchases.


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