Dividends4Life: Bank Stocks With Dividends Set to Increase in 2011

Looking at the actions by the big four banks, Bank of America cut its quarterly dividend in half (from $0.64 per share to $0.32) in October 2008, before cutting it again to $0.01 per share in January 2009. While Citigroup cut its dividend much earlier, from $0.54 per share to $0.32 in January 2008, the firm followed a stair-step path down with its dividend, which fell to $0.16 per share in September 2009, dropped down to $0.01 in January 2009, and was finally discontinued in February 2009. Even though they held up a lot better than either Bank of America or Citigroup, both J.P. Morgan and Wells Fargo cut their quarterly dividends by around 85% to $0.05 per share during the first quarter of 2009. While many of the top U.S. banks have repaid their TARP obligations during the last two years, the restrictions on dividend increases have remained in place.

That may all change this year, though, as the top 19 banks are currently going through another round of stress tests and may finally get approval from the Federal Reserve to raise their dividends. J.P. Morgan recently suggested that it likely would be getting an answer on its request to raise its dividend the week of March 21, 2011; back in January, CEO Jamie Dimon talked up the prospect of a $0.75-$1.00 per share annual dividend (compared to $0.20 currently). Believing most of the banks that are eager to raise their dividends have already talked about target ranges and are just waiting for the Federal Reserve's approval before pulling the trigger3.

Source: Morningstar

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