Bank Dividend Cuts
JPMorgan Chase (JPM) cuts its annual dividend from $1.52 to 20 cents per share today. JPMorgan is preparing for a longer recession and double digit unemployment. JPMorgan has been deemed to be in the best financial shape of the other major banks. In the current marketplace that is like having the best seat on the Titanic. Banks are hemorrhaging and need every bit of capital that they can get their hands on. If JPMorgan is cutting their dividend then other major banks dividends are in trouble as well. Now that JPMorgan has cut its dividend, it will be easier for the following major banks to follow suit.
Wells Fargo (WFC) and its $1.36 dividend will likely go down to about 10 cents per share.
US Bancorp (USB) and its dividend of $1.70 is currently yielding over 16%. The yield is way too high. The new dividend would be about 10 cents per share.
PNC Financial (PNC) needs to cuts its $2.64 dividend with its 11.4% yield. PNC has not cut its dividend at all since receiving almost 8 billion in TARP money. PNC’s dividend should be cut to about 25 cents per share.
Suntrust Banks (STI) will probably undergo it third dividend cut in less than a year. I expect a drop from 40 cents to 8 cents per share.
Bank of New York Mellon (BK) is in the same boat as PNC Financial. Bank of New York has not had a dividend cut since receiving 2 billion dollars of TARP funds.
All of the dividend estimates are based on the Bank of America, Citigroup, JPMorgan models. Each of these banks cut their dividends to a yield that was approximately 1% of the stock’s price.
