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TheStreet Open House

5 Bank Stocks That Need a Higher Dividend (Update 1)

Stocks in this article: BACJPMWFCRFFITBUSBEWBCPB

1. Wells Fargo

Shares of Wells Fargo (WFC) closed at $29.60 Friday, returning 7% year-to-date. Based on a quarterly payout of 12 cents, the shares have a dividend yield of 1.62%.

The company repurchased 27 million common shares during the fourth quarter.

Wells Fargo posted fourth-quarter earnings of $4.1 billion, or 73 cents a share, increasing slightly from $4.1 billion, or 72 cents a share, the previous quarter, and $3.4 billion, or 61 cents a share, a year earlier.

Please see TheStreet's earnings coverage for detailed review of Wells Fargo's fourth-quarter results,

Wells Fargo's ROA has ranged between 1.11% and 1.27% over the past year, for the best and most consistent earnings performance among the "big four" U.S. bank holding companies.

Atlantic Equities analyst Richard Staite on Friday called Wells Fargo a "key pick" in the banking sector, citing the company's strong mortgage banking revenue and growth in net interest income, and saying the company "should see a significant boost to earnings in 2012 and 2013 with costs set to decline by at least 12%. It is gaining market share and returning capital to shareholders."

Wells Fargo's executives were coy about dividend plans for 2012, but the numbers show plenty of room for a significant dividend increase.

Guggenheim Securities analyst Marty Mosby on Tuesday said the stress tests results will "WFC's strong capital position and profitability as they are able to increase their dividend by 50%, resulting in a payout ratio around 30% and a dividend yield above 3%."

The shares trade for 1.7 times tangible book value and for nine times the consensus 2012 EPS estimate of $3.19.

Interested in more on Wells Fargo? See TheStreet Ratings' report card for this stock.

>>To see these stocks in action, visit the 5 Bank Stocks That Need a Higher Dividend portfolio on Stockpickr.

-- Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here: Philip van Doorn.

To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.

To submit a news tip, send an email to: tips@thestreet.com.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
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