Can Wells Fargo’s Capital Returns Lure Investors in 2017?




Wells Fargo (WFC) is one of the highest dividend-paying stocks among its peers (XLF). In June, the Fed approved Wells Fargo’s capital plans after it found that Wells Fargo could keep lending in a severe economic downturn. This approval clears the way for Wells Fargo to reward investors through dividends and share repurchases. The bank 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 $0.375. For more on this topic, read Did Wells Fargo Pass the Fed’s Stress Test?

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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 in its peer group. 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 and 1Q16, the company returned $34 billion to shareholders, outpacing 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 and long-term prospects. To learn more, you could also 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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