This week the trend in dividend stocks increasing their dividend payments has continued. Applied Materials (AMAT) raised their dividend by 17% on Monday and Staples (SPLS) increased their dividend payout by 9% yesterday. However, the one sector that has been eerily missing in these positive dividend announcements has been financial stocks.
Before the great recession hit in 2007, financial stocks offered dividend investors some of the most attractive yields in the market. Of course, as Wall Street crumbled and age-old firms vanished, so did the dividend yields that these financial firms offered.
JP Morgan Chase (JPM) offered investors a 4.8% dividend yield at the end of 2008 before slashing their dividend payment by 87% in 2009. Now they offer a paltry 0.5%.
Citigroup (C) had consistently paid dividends since its inception in 1998. During 2006 – 2007, Citi offered a healthy dividend yield between 3% – 4% and as their stock price crashed in 2008 their yield jumped to over 7%. However, in early January 2009 as their stock price was headed below $1, the financial giant completely eliminated their dividend is a massive cost cutting move.
Bank of America (BAC) offered a respectable 4% dividend yield before the market crash sent their dividend yield above double-digits. In October 2008, Bank of America cut their dividend in half after the financial firm saw earnings fall 68% in the third quarter. Just three months later, under pressure from the federal government, Bank of America slashed their dividend by 97% to a meager $.01 per share each quarter.
With the flood of dividend increases that we have seen in 2010, many have been anticipating similar increases from these financial stocks. However, the Financial Times reported yesterday that U.S. regulators have advised these firms to not increase their dividends nor engage in stock buyback programs “until political and economic uncertainty surrounding the industry dissipates”.
JP Morgan Chase, which is arguably in the best shape of any financial firm, has indicated that they would like to increase their dividend payment from its current nominal level. However, dividend investors shouldn’t bet against the influence of the Fed. We likely will not see any dividend increases from these financial stocks until at least the second half of this year and probably not until 2011.
Disclosure: No Positions