This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Banks Heading Into Dividend Sweet Spot: KBW

NEW YORK ( TheStreet) -- Bank stock investors may be looking at some very attractive dividend yields next year.

According to KBW analyst Frederick Cannon, JPMorgan Chase (JPM - Get Report) -- with shares already featuring an attractive dividend yield of 2.82% based on a 30-cent quarterly payout and Friday's closing price of $42.56 -- could see its dividend yield climb to a fat 3.76% in 2013.

Cannon expects JPMorgan's payout to climb from $1.15 a share in 2012 (the dividend was raised by a nickel in the second quarter) to $1.60 next year.

As investors have learned in brutal fashion over the past five years, banking is a cyclical industry, and when heading into a recession -- especially the mother of all recessions -- it is best to bail. But at this point, despite various challenges, including narrowing net interest margins, an increasing and expensive regulatory burden, and significantly higher capital requirements, the banking industry is on the upswing.

The Federal Deposit Insurance Corp. reported last week that during the third quarter, U.S. banks earned $37.6 billion, for the industry's best performance since 2006. Credit quality was continuing to improve, and with most of the nation's largest banks having very strong levels of loan loss reserves, the release of reserves appears likely to continue for the next year or two, boosting bottom lines and mitigating the effect of margin pressure. The mortgage loan refinance boom is also providing a temporary boost to revenue, as the banks not only capture loan origination fees, they book gains on the quick sale of new loans to Fannie Mae (FNMA) and Freddie Mac (FMCC).

And the Federal Reserve is doing what it can to make sure that investors in the nation's largest banks don't face the possibility of dividend cuts, because the regulator's stress test methodology includes a "severely adverse scenario," which will gauge the banks' abilities to pay higher dividends and repurchase shares, as per their capital plans, in the event of a severe recession, with unemployment increasing by four percentage points above current levels. The unemployment rate in November was 7.7%, according to the Bureau of Labor Statistics. Even at the low point of the "great recession," the unemployment rate didn't come anywhere near 11.7%.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
C $46.68 0.00%
CIM $14.05 0.00%
FITB $18.45 0.00%
JPM $63.79 0.00%
PNC $87.91 0.00%


Chart of I:DJI
DOW 17,891.16 +117.52 0.66%
S&P 500 2,081.43 +16.13 0.78%
NASDAQ 4,817.5940 +42.2360 0.88%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs