Are Big Banks Opening Up Their Pockets For Dividend Investors?

We’ve just begun the second quarter earnings season cycle. The earnings season happens four times a year, and it’s always a time for investors and analysts to check in with the companies they follow and invest in. The season is often kicked off by three of the biggest banks: JPMorgan Chase JPM, Citibank C, and Wells Fargo WFC. Their performance can tell us a lot about the state of the economy. There appears to be some promising news for those of us looking for a dividend with our stock appreciation. 

Private credit offers up to 20% APY. Potential accredited investors are looking to capitalize on this growing asset class.

Another Record For JPMorgan Chase

Many big banks have enjoyed strong returns over the last several years, first among them JPMorgan Chase, which hit another record profit in the second quarter. Net income rose to $18.1 billion, and net revenue was over $51 billion. The consumer banking division activated more than 450,000 new accounts, making this the 50th consecutive quarter of net new account growth. Investment assets rose by 14%. 

JPMorgan Chase CEO Jamie Dimon is known for being a bit of a doomsayer. Despite the strong returns, he noted caution in his statement, saying that the macroeconomic climate remains uncertain, with geopolitical risk still higher than average. He also stated that while inflation is cooling, it is possible that both "inflation and interest rates may stay higher than the market expects."

JPMorgan Chase isn't a stock one usually purchases for the dividend yield. The forward dividend yield is a modest 2.22%. After keeping its dividend at $1 for nearly two years, JPMorgan Chase raised it by 15% over the last four quarters to $1.15. The bank announced it is now looking to raise that to $1.25, an increase of over 8% from the previous increase. During the quarter, the bank spent a whopping $4.9 billion on share buybacks even though the stock price has increased over 20% in the past six months.

On the earnings call, HSBC analyst Saul Martinez questioned if JPMorgan Chase might pay a special dividend in the future. Chief Financial Officer Jeremy Barnum indicated that paying a special dividend is not Dimon's preference and that, instead, the focus is on paying a dividend that is "sustainable and also sustainable in a stressed environment." So, it seems an additional payout is off the table for now. 

Citigroup In Transition

It's been a different story at Citigroup for the last several years. CEO Jane Fraser has led the company through a massive reorganization, cutting thousands of jobs. The bank reported $3.2 billion in net income, up 10%. Revenue just barely beat expectations, coming in at $20.14 billion.

Citigroup's troubles may be mostly in the past, but regulators still keep a sharp eye on it. The Federal Reserve Board fined the bank $60.6 million for making slow progress on managing its data appropriately. The health of the U.S. consumer is also a worry for Citi. Speaking to analysts, Chief Financial Officer Mark A.L. Mason observed that the company is seeing a divergence in consumer behavior, with its lower-income customers starting to show signs of strain. Fraser underlined that point: "A lot of the spending and the growth areas we are seeing, and the underlying numbers, are being driven by the affluent customer."

Citigroup has been even more cautious about its dividend payment. It held the payment at $0.51 from 2019 to the middle of 2023 and then only raised it by $0.02. It recently announced plans to increase the dividend by 6% to $0.56, which, while not a huge amount, is at least a step in the right direction. The forward yield before this increase stands at 3.23%. The company will also restart buybacks with a plan to spend $1 billion on buybacks during the coming quarter. 

Commercial real estate has historically outperformed the stock market, but few investors have the capital or resources needed to invest in this asset class. This platform allows individuals to invest in commercial real estate.

Wells Fargo Moves Forward

Wells Fargo has struggled on multiple fronts over the past several years. It has faced steep fines from regulators over account mismanagement issues that led to undeserved fees and other negative consequences for its customers. Wells Fargo also has significant exposure to the mortgage market, although it has dramatically scaled back its mortgage lending, reducing its head count by 45% over the past year. Second-quarter revenue was slightly surprising to expectations, coming in at $20.29 billion.

When it comes to dividend good news, we've saved the best as far as percentages. Wells Fargo reiterated its commitment to raising its dividend by 14% to $0.40 per share. It last raised its dividend one year ago and has a forward dividend yield of 2.33%. Wells Fargo was the biggest spender of these banks on buybacks, spending $12 billion over the first half the year. CEO Charlie Scharf told analysts that "while the pace will slow, we have the capacity to continue repurchasing stock."

For Wells Fargo, one dark cloud impacting its dividend future growth could be commercial real estate. On the earnings call, Scharf explained that its office real estate loan portfolio is a point of weakness: "Fundamentals in the institutional-owned office real estate market continued to deteriorate as lower appraisals reflect the weak leasing market in many large metropolitan areas across the country."

While dividends aren't the main reason to invest in large banks, these banks have all demonstrated a commitment to maintaining dividends in good times and bad.

Are You Missing Out On Higher Yields?

The current high-interest-rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, but not through dividend stocks… Certain private market real estate investments are giving retail investors the opportunity to capitalize on these high-yield opportunities and Benzinga has identified some of the most attractive options for you to consider. 

For example, the Jeff Bezos-backed investment platform just launched its Private Credit Fund, which provides access to a pool of short-term loans backed by residential real estate with a target 7% to 9% net annual yield paid to investors monthly. The best part? Unlike other private credit funds, this one has a minimum investment of only $100. 

Don't miss out on this opportunity to take advantage of high-yield investments while rates are high. Check out Benzinga's favorite high-yield offerings. 

© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.