Wells Fargo & Co. (WFC) Wells Fargo & Co. (WFC) is one of the four largest banks in the US, with diversified financial offerings across retail, commercial, and corporate banking services. A recession is a time for dividend cuts, and even though most U.S. banks are in much better shape than they were at the start of the 2008 financial crisis, investors are showing no confidence in the industry.The trailing dividend payout ratio was calculated by dividing the current annual dividend rate per share by earnings per share for the past four quarters.
Wells Fargo’s quarterly dividend is 51 cents a share, for a yield of 9.10%, based on the stock’s closing price of $22.42 on May 13. Wells Fargo is now paying a nearly 5% dividend yield. Founded in 1852, Wells Fargo has grown to ~$1.9 trillion in assets and 70+ million customers. Chief Executive Officer Charlie Scharf said last month that the timing and pace of the economic recovery, as well as Wells Fargo’s ability to improve its results, will dictate the appropriate dividend level. Unlike its biggest rivals, JPMorgan Chase & Co. and Bank of America Corp., Wells Fargo doesn’t have a sizable trading operation benefiting from market volatility to soften the blow of the pandemic.Shares of Wells Fargo dropped 6.5% to $25.58 at 1:04 p.m. in New York, compared with a 3.7% decline for the S&P 500 Financials Index. They’re now one of the largest financial institutions in the world. Wells Fargo & Company (WFC) Dividend Safety metrics. So, when mega-bank Wells Fargo (WFC) recently cut its dividend by 80%, bank investors were certainly put on notice. A payout ratio of “N/A” means the current annual dividend rate exceeds the past four quarters’ EPS, or in the case of the forward KBW estimates, that the current annual dividend rate will exceed 2020 EPS.Morgan Stanley analyst Adam Jonas raised his bull case estimate for Tesla stock to $2,500 a share Wednesday, but actually rates it Sell.Investors are looking ahead to a difficult credit cycle. Shares of Wells Fargo dropped 6.5% to $25.58 at 1:04 p.m. in New York, compared with a 3.7% decline for the S&P 500 Financials Index. KBW analyst Brian Kleinhanzl wrote in a separate report May 13 that “WFC’s high payout ratio is the primary driver of investor fear that a dividend cut could happen,” and cited an estimated dividend payout of 221% for 2020, compared with KBW’s estimates of a median payout ratio of 59% for universal banks covered by the firm.KBW also listed six small to mid-sized banks that have reduced their dividends recently:Here’s KBW’s entire list of 21 banks that are potential candidates for dividend cuts, sorted by total assets:So it is not surprising that some banks have already reduced their dividends to shore up cash.Analysts at Keefe, Bruyette & Woods, led by Christopher McGratty, on Wednesday listed 21 banks they say are “potential dividend cut candidates,” even though they think dividends are “‘broadly safe’ for 90% of the banks, a sharp contrast relative to the financial crisis” of 2008. They’re down 52% this year. He said that while the firm’s capital base is strong, earnings were weak in the first quarter and will remain so in the second quarter.A company representative declined to comment on the stress tests. The Dodd-Frank legislation in 2010 raised banks’ capital requirements and strengthened regulatory oversight. If second-quarter income matches the first quarter, its average for the past four quarters would be $2.2 billion, clearing it to continue paying out $2.1 billion in dividends.New rules limiting dividends and stock buybacks in response to the Covid-19 pandemic leave the San Francisco-based company most exposed to potential payout cuts.