By Roger Nachman
Now may be a good time to look at the big international banks, as hopes increase the companies will be allowed to raise their dividends sometime in the next few months.
Names like Citigroup (NYSE: C), J.P. Morgan (NYSE: JPM), Bank of America (NYSE: BAC), Capital One (NYSE: COF) and Goldman Sachs (NYSE: GS) would all likely benefit as they are allowed to increase the dividends they pay to investors.
Dividend investors, mutual funds based on yield, as well as ETFs that are dividend specific would cause increased buying pressure in the names, thus boosting share prices.
Executives like Jamie Dimon and Lloyd Blankfein would also benefit, and if these two benefit, it's not a bad idea to be on the same side of the trade.
Dimon would likely reap around $6 million per year just from dividend payments, which is almost a third of his pay from 2010.
Jamie Dimon, chief executive of JPMorgan Chase, stands to eventually reap nearly $6 million a year in dividend payments from the stock he owns, an amount that equals almost a third of his total pay in 2010.
Capital One's CEO Richard D. Fairbank, could make as much as $3 million a year if the company is allowed to raise its dividend.
Goldman, along with American Express (NYSE:AMX) may decide to buy back shares, instead of issuing dividends. Goldman still has the preferred shares that it sold to Warren Buffett during the financial crisis that it will look to buy back.
The Federal Reserve is expected to weigh in as early as Monday, as to whether these banks can raise their dividends, and many expect that they will be allowed to raise them, but perhaps not as high as some would like.
“Even a small dividend can add up to a pretty substantial amount of money,” said Paul Hodgson, a senior research associate at GovernanceMetrics International. “It could be just another bonus for some C.E.O.'s. For others, it is a huge windfall.”
The Federal Reserve is conducting a second round of "stress tests" on the nation's 19 largest banks. The tests will show whether banks have enough capital to deal with a weak economic recovery, and meet the higher requirements for capital from such accords as Basel III.
“Allowing some dividends to go up is a big vote of confidence in our banks,” said Jeffery Harte, an analyst at Sandler O'Neill.
The top banks will learn the results of the examinations by Monday.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.