Big Banks Seen Increasing Dividends by 10% on Average

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Wells Fargo could raise its quarterly dividend by 150%, Barclays analyst Jason Goldberg estimates.

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Wells Fargo, Goldman Sachs Group, and Morgan Stanley could have some of the largest dividend increases among the big banks in the wake of the Federal Reserve’s industry stress tests released on Thursday.

The bank’s dividend plans will likely be announced after 4:30 p.m. Eastern time on Monday. The prospect of dividend increases and large stock repurchase programs buoyed bank stocks Friday, and the sector gained 1.5%.

Big banks should have dividends in the range of 2% to 3% after increases that are expected to average 10% across about 20 large banks, according to Barclays analyst Jason Goldberg.

   Wells Fargo (ticker: WFC) could lift its quarterly payout to 25 cents a share from 10 cents, a 150% increase, resulting in a yield of 2.2%, according to a research note from Goldberg. Such a boost would only partly offset the big cut in the bank’s dividend last year, when the quarterly payout dropped from 51 cents a share. Wells Fargo stock was up 2.7% Friday, to $46.38.

   Goldman (GS) and Morgan Stanley (MS), which have been cashing in on robust conditions for trading and investment banking, may also sharply lift their dividends. Goldberg pegs the new Goldman quarterly dividend at $2 a share, up from $1.25. The new yield would be 2.2%. Goldman shares were up 2 cents Friday, to $368.77. Morgan Stanley’s quarterly payout could rise to 55 cents from 35 cents, producing a 2.5% yield. Its stock rose 1.5% Friday, to $88.40.

Industry leader JPMorgan Chase (JPM) could see its dividend increase to $1 a share from 90 cents, producing a yield of 2.6% at its share price of $154. The payout at Bank of America (BAC) might advance to 22 cents a quarter from 18 cents for a 2.1% yield, and Citigroup’s (C) dividend could rise to 56 cents from 51 cents a quarter for a 2.2% yield, Goldberg estimates.

  Among other large banks, PNC Financial Services Group (PNC) could see its dividend rise to $1.25 a quarter from $1.15 for a 2.6% yield, and U.S. Bancorp (USB) may lift its dividend to 44 cents a quarter from 42 cents for a 3% yield, Goldberg projects.

Write to andrew.bary@barrons.com

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