Wells Fargo expected to lead dividend payout
Wells Fargo & Co. and Citigroup Inc. could lead banks that will spend more than $9 billion on dividend increases and share buybacks if they get passing grades this week on the Federal Reserve’s annual stress test, Bloomberg reported.
Thirteen of the 19 largest U.S. lenders may say they’ll pay out $3.79 billion in extra dividends this year and buy $5.52 billion of additional shares, according to estimates of six analysts compiled by Bloomberg. That’s 30 percent more than they spent last year. Wells Fargo could offer the biggest difference at a combined $4.16 billion, followed by Citigroup with $2.92 billion, Bloomberg said.
Investors are pressing lenders to restore dividends and buybacks to levels that prevailed before the financial crisis, when they were all but eliminated under terms of U.S. bailouts, Bloomberg said.
Dividends contributed about two-thirds of the total return for stockholders during the decade before the 2008 crisis, as measured by the KBW bank index. The 24-company benchmark now yields 1.8 percent, about half the average in 2007, Bloomberg said.
The index has rallied 16 percent this year, partly in anticipation that banks will get permission to increase payouts after getting results of the stress tests, which are due Thursday.