Since the financial crisis of 2008, the major U.S. banks have slashed dividends in an effort to retain capital and improve operating conditions. This has contributed to the stock’s declines, as investors continue to clamor for dividends in many markets.
Jamie Dimon of JPMorgan Chase (NYSE: JPM) recently spurred speculation of the return of dividends, by repeatedly stressing the firm’s commitment of providing returns to investors. However, a stumbling block to this to date has been the Federal Reserve, which has sought a period of no major changes to the banking sector could improve before prompting the distribution of retained earnings.
Now, there seems to be a change in the tide. The Federal Reserve has adopted a plan to let healthy banks boost dividends paid to investors. To do so, the banks need to show the Fed’s bank examiners that they’re in good financial health and that they have adequate capital to absorb potential losses — even after paying the dividend.
The Fed oversees Wall Street’s biggest banks, including Citigroup (NYSE: C), Bank of America (NYSE: BAC), JPMorgan Chase & Co. (NYSE: JPM), and Wells Fargo (NYSE: WFC). By boosting their dividend payments, banks may be able to attract new investors and we may seek their stocks begin to climb back to pre-crisis conditions.
