BB&T increases shareholder dividend
Jan 22, 2013 (Menafn - Winston-Salem Journal - McClatchy-Tribune Information Services via COMTEX) --BB&T Corp. and Wells Fargo & Co. flexed their financial muscles Tuesday, each raising its quarterly dividend by 3 cents.
It was the second increase for each bank since the financial crisis began in late 2007.
For BB&T, the dividend increased to 23 cents a share. Wells Fargo's dividend rose to 25 cents. Both increases are for the first quarter,
BB&T's dividend is payable March 1 to shareholders registered Feb. 8. The bank's fourth-quarter dividend of 20 cents is payable Feb. 1. It was declared Dec. 18.
For Wells Fargo, the dividend is payable March 1 to shareholders registered Feb. 1.
BB&T said the dividend increase is "consistent with the capital actions proposed in its 2012 capital plan to the Federal Reserve."
Tony Plath, a finance professor at UNC Charlotte, said Kelly King, the bank's chairman and chief executive, is telling investors through the dividend hike "that the Fed agrees that BB&T has sufficient financial strength."
"That makes it quite likely BB&T is about to easily pass the next round of Fed stress testing of the big banks," Plath said. "That's really important news for the bank, which is what makes this dividend increase a little bit more significant than just a run-of-the-mill dividend increase."
BB&T raised its dividend by 4 cents to 20 cents in March, shortly after getting the Fed's thumbs-up on its capi-tal plan.
Arnold Danielson, chairman of Danielson Associates in Bethesda, Md., said BB&T already was providing a higher dividend yield than all of its major competitors before announcing its latest increase.
"Bank of America Corp., SunTrust Banks Inc. and Regions Financial Corp. are below 1 percent, so BB&T is more than competitive," Danielson said. "Its dividend before also approximates that of JPMorgan Chase & Co. and PNC Financial Group Inc."
Wells Fargo also cited its 2012 capital plan in providing the dividend increase. The bank said it submitted its 2013 capital plan Jan. 4.
"The dividend increase approved by our board today was included in our 2012 Capital Plan and reflected the confidence we have in our company's performance," John Stumpf, Wells Fargo's chairman and chief executive, said in a statement.
Stumpf said the bank has requested the ability for another capital distributions in the 2013 capital plan.
Wells Fargo raised its dividend by 12 cents to 22 cents on the same day as BB&T last March.
Still, the banks' dividends remain below the amounts -- 47 cents for BB&T and 34 cents for Wells Fargo -- that preceded the financial crisis.
Most banks sharply cut their dividends in 2008 and 2009 as part of the conditions for receiving money from the controversial Troubled Asset Relief Program.
When King announced the decision in May 2009 to cut the bank's dividend to 15 cents to preserve the bank's long-term stability, he called it "the worst day in my 37-year career."
Because of BB&T's solid financial performance the past five years, including being one of the few large banks to post a profit each quarter, officials said they have felt a particular tug from shareholders for a dividend increase as a reward for their loyalty or to pad the supplement to their retirement income.
King said at BB&T's annual shareholders meeting last April he expects the Fed to continue to restrict how and when banks can raise their dividends, essentially requiring them to pass annual economic stress tests.
"I want shareholders to know it is my personal priority to raise our dividend as part of returning shareholder value," King said in April. However, he also said raising the dividend remains second behind growing the bank in terms of strategic importance.
Plath said he expects most of BB&T's peers and competitors to announce dividend increase in the next few weeks, but not likely Bank of America Corp. and Citigroup.
"The increases are a reward to shareholders who have stuck by them over the course of the last few years." Plath said.
"It also will be a signal to the market that this group of banks is financially strong, fully recovered from the 2007-08 financial crisis, and moving forward with both revenue and profit growth in 2012, and expectations for this growth to continue in 2013."
BB&T's board of directors also said it will declare quarterly dividends in the same month as its earnings reports -- January, April, July and October -- with the payment dates on or about March 1, June 1, Sept. 1 and Dec. 1.
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