A Raise Sent by Stagecoach
Twenty of the twenty-five banks required to play in the Fed's Comprehensive Capital Analysis and Review, more commonly known as stress tests, had their capital plans approved on the 25th. I was happy to see one of my larger holdings, Wells Fargo, in that pack.
The dividend hike in Wells' capital plan still needs to be approved by the board and the plan includes a share buyback authorization that has already been approved. The dividend hike will bump the payout from 30 cents/share/qtr - a nice 16.7% boost - which makes the forward yield 2.85% based on today's closing price.
The increased share buyback authorization is for 350 million shares, or over 6.5% of the shares outstanding as of 31 Dec. Just because a buyback is authorized doesn't always mean all the shares will actually be repurchased and companies often issue new stock for options or other purposes that make the buyback just tread water. In Wells' case, the buyback program has been reducing shares outstanding.
At about 12 time earnings and 1.8 times tangible book value, the stock is priced reasonably compared to the broad market and is roughly in line with peer JP Morgan. If it wasn't already one of my bigger holdings, I'd probably be adding here, but since it is, I won't unless the stock pulls back.
As always, do your own work before making a buy or sell decision. The risks for Wells include a significant mortgage business that has been dinged by rising rates.
Fool on! Russ
Disclosure: As mentioned above, long WFC.