Schwab Jumps on Dividend Talk

Updated from 1:20 p.m.

Shares of Charles Schwab(SCHW Quote) jumped 6% on hopes of a big dividend payout.

Investors were speculating that the San Francisco-based broker could dump a huge dividend into investors' laps once its sale of U.S. Trust is completed, according to some observers.

Shares closed up $1.24 to $20.97, a 52-week high, on volume of 29 million shares -- more than triple the average.

Schwab agreed in November to sell U.S. Trust, its wealth management subsidiary, to Bank of America(BAC Quote) for $3.3 billion. It anticipates proceeds from the deal, expected to close by the end of June, of $2.5 billion after taxes.

The company has been mum on exactly how the proceeds would be used, saying only that it would use them for "general corporate purposes, including share repurchases and continued investment in Schwab Investor Services, Schwab Institutional and Schwab Bank."

But Schwab is essentially going to be "awash in capital," once the deal closes, says Brad Hintz, an analyst at Sanford Bernstein who has an outperform rating on the company.

Some traders are bandying about talk of a dividend as large as several dollars a share. Hintz expects the company to offer a more "modest" one-time dividend -- in the range of $500 to $600 million, he says. With Schwab having more than a billion shares outstanding, a dividend in that range figures to be worth around 40 or 50 cents a share.

A Schwab spokesman declined to comment on Friday.