One of our themes for investing in JP Morgan Chase (JPM), Wells Fargo (WFC), and Morgan Stanley (MS) is increased returns of capital to shareholders.
We believed that all three had more than enough capital to pass the Federal Reserve’s stress tests and return a large portion of their excess capital back to shareholders. Yesterday all banks passed their stress tests. Afterward JP Morgan, Morgan Stanley, and Wells Fargo, all announced bigger capital returns.
From JP Morgan’s press release.
JPMorgan Chase’s Board of Directors intends to increase the quarterly common stock dividend to $0.56 per share (up from the current $0.50 per share), effective the third quarter of 2017, and has authorized gross common equity repurchases of up to $19.4 billion between July 1, 2017 and June 30, 2018 under a new common equity repurchase program.
That is a 12% increase in its quarterly dividend and at today’s trading price a potential 6% reduction in shares outstanding.
Morgan Stanley (MS)
From Morgan Stanley’s press release.
The capital plan includes the repurchase of up to $5 billion of outstanding common stock for the four quarters beginning in the third quarter of 2017 through the end of the second quarter of 2018, an increase from $3.5 billion in the 2016 Capital Plan, as well as an increase in the Firm’s quarterly common stock dividend to $0.25 per share from the current $0.20 per share, beginning with the common dividend expected to be declared for the third quarter of 2017.
This is a 25% increase in Morgan Stanley’s quarterly dividend. Morgan Stanley raised its buyback prorgam from $3.5 billion in 2016 to $5 billion, $1.5 billion more. At today’s trading price this a further 1.8% reduction in shares outstanding on top of the 2016 plan.
Wells Fargo (WFC)
From Wells Fargo’s press release.
Wells Fargo’s 2017 Capital Plan covers the four-quarter period from the third quarter of 2017 through the second quarter of 2018. As part of this plan, the Company expects to increase the third quarter 2017 common stock dividend to $0.39 per share from $0.38 per share, subject to approval by the Company’s Board of Directors. The plan also includes up to $11.5 billion of common stock repurchases1 for the same four-quarter period. For the previous four quarters ended first quarter 2017, the Company repurchased $8.3 billion of common stock.
Wells Fargo is only growing its dividend by 2.6% but the $11.5 billion earmarked for buybacks could reduce shares outstanding by 4% at today’s trading price.