Dimon also said that the bank would continue to pay dividends, but those payments could also be in jeopardy if the Federal Reserve decides that the derivatives losses threaten the stability of the banking system. Given a choice between two bad alternatives, Dimon and JPM have chosen to retain dividend payments in an effort to keep shareholders at least reasonably happy. By suspending its share buybacks, the bank is hoping to cut off any demand to kill its dividend payments.

The SEC, the FBI, and the Commodities Futures Trading Commission (CFTC) have all launched investigations into JPM’s recently announced trading loss of $2 billion and counting.

As the market continues to slide, JPM’s losses from the trades continue to mount and could top $5 billion. The catch is that no one really knows the extent of the bank’s exposure, probably including even the bank itself.

Shares are down less than -1% at $33.18 in a 52-week range of $27.85-$46.49.

Paul Ausick

The Thursday disclosure of a loss of about $2 billion due to egregious failures in risk management now puts J.P. Morgan Chase in the same league as Bank of America Corporation (NYSE: BAC) and Citigroup, Inc. (NYSE: C).  Jamie Dimon has been the most vocal bank executive out there and this is not exactly going to help Dimon in any of his future arguments against more and more bank regulations.

Simon Johnson at MIT’s Sloan School of Management is shown here calling for the possibility of a resignation of Jamie Dimon.  Johnson went on to note that if any other company lost this much then the person responsible would be forced to resign.  He did note that it is not going to happen in banking where regulators move to oust Jamie Dimon.  Johnson is one of the voices calling for the break-up of the big banks

Dimon noted that this trade did not violate the Volcker Rule but it did violate the Dimon Principle.  What happens when your hedges are wrong hedges?  The loss could cost another $1 billion over the next quarter or two as well as the trade was called flawed synthetic credit derivatives which are volatile.

So, back to this call for a Dimon resignation.  Dimon remains one of the top executives out there in banking and in corporate America.  He was recently cleared to lift the common stock dividend and to buy back stock.  Dimon always said that he would buy stock back when its price made sense to do.  A drop of almost 8% down to $37.60 takes this banking stock down to prices not seen since February 16, 2012.  The dividend-adjusted closing price at the end of 2011 was $32.80.

There is another call for Dimon’s role of Chairman and CEO to be split as well.  AFSCME sent out an email noting, “After JP Morgan’s Jamie Dimon lost $2 Billion in risky trading, today, AFSCME issued a renewed call for the shareholders of JPM to end Dimon’s reign as Chairman and CEO and adopt an independent board chair.”  In short, the call is keep Dimon on as CEO but to bring in a new Chairman of the Board that is independent of the company.

Congressman Barney Frank (co-author of Dodd-Frank) has publicly said, “JP Morgan Chase, entirely without any help from the government has lost, in this one set of transactions, five times the amount they claim financial regulation is costing them. The argument that financial institutions do not need the new rules to help them avoid the irresponsible actions that led to the crisis of 2008 is at least $2 billion harder to make today.”

Jamie Dimon may have taken a body blow here, but the notion that this will cause his resignation seems very unlikely.  The next risk is the pending downgrade of more than 100 of the top global banks from Moody’s.

FBR was one of the firms which downgraded J.P. Morgan shares this Friday and the target was taken down to $37 from $50 previously.

JON C. OGG

Following a strong quarterly earnings report, AIG shares closed last week at $32.94, well above the price the company paid for the Treasury’s shares. Traders immediately pushed the price of AIG shares down to the price paid to the Treasury Department, but prices have recovered somewhat since then.

Depending on one’s view of what the Treasury paid for AIG’s stock, US taxpayers made a profit of about 6% on the shares it sold today based on the Treasury’s stated purchase price of $28.73/share. There is an argument, however, that the AIG stock actually cost taxpayers $43.53/share, which means that today’s sale totes up to a loss of about -30%.

The one indisputable aspect of today’s sale, though, is that the Treasury received $1.50/share more from AIG than it had in two previous sales. A research note from Bernstein notes “future offerings will likely be priced at levels at or above today’s offering price, for we think the weekend trade has taken away the prospect of another offering at $29 and will force a decision on the investors who’ve been waiting for the stock to return to that level.”

Shares of AIG were down about -7% right at the opening, but have since come back slightly, to trade down -5.6% at $31.00 in a 52-week range of $19.28-$35.05.

Paul Ausick

Gabelli’s call noted, “We view the quarter’s results as especially strong given Sirius raised list prices in Q1 by $1.54 (or 12%) to $12.95. Subscriber ARPU +2.0% sequentially (below the 12% price increase) as the price increases only impacted 35% of subscribers, and Sirius likely used pricing promotions to mitigate churn.”

More data showed that SIRIUS XM’s net debt to trailing adjusted EBITDA now stands at 2.9-times, which is actually under the company’s own 3.0-times stated target. SIRIUS XM added 405,000 subscribers in the latest quarter and it is now at its highest count with some 22.3 million subscribers.  The company also lifted its year-end target for subscribers to rise by about 1.5 million in 2012 versus a prior projection of 1.3 million new subscribers.

The Gabelli report also hints at dividends or share repurchases coming down the pipe later this year due in part to the lack of attractive acquisition targets in this satellite radio (and satellite media delivery).  As far as which method the company will return money to its shareholders, “We believe shareholder returns will take the form of buybacks.”

What Gabelli is holding some merit on for its caution is that with EBITDA trading at 16.3-times its 2012 estimates it noted, “we do not believe there is a sufficient margin of safety to add to a position at current prices.”

Perhaps the larger issue is what ultimately happens with John Malone and the Liberty Media Corporation (NASDAQ: LMCA) and the effort for ‘de facto control’ as an unresolved issue.

Pandora Media, Inc. (NYSE: P) may also come under fire as CEO Mel Karmazin has said that SIRIUS plans to introduce a personalized radio service in 2012.

SIRIUS XM shares are up $0.01 today at $2.24 against a 52-week range of $1.27 to $2.44.

JON C. OGG

The dividend hike just announced by Exxon Mobil is a hike of 21% from $0.47 per share to $0.57 per share per quarter.  The prior dividend yield rate of 2.2% will now go up to 2.63% based upon the $86.65 price of the stock.

Exxon’s rival Chevron Corporation (NYSE: CVX) is only about half of its size but is a DJIA component and it has a dividend yield of close to 3.2% for income-oriented investors.  Today’s hike from Exxon Mobil does not exactly close the entire gap between the two dividends, but it will likely be two more quarters or so before Chevron moves its dividend higher.

Today’s move moves Exxon Mobil more into the middle of the pack of the 30 DJIA components rather than closer to the bottom-third of the 30 components.  More dividend hikes will be coming down the road from Exxon Mobil.  More share buybacks are likely coming down the pipe too.

JON C. OGG

The dividend announcement this morning took the payout to $0.85 per common share per quarter, which is actually up by $0.10 or 13% from the prior $0.75 payout.  In short, IBM’s dividend hike is above that 8% or so average DJIA payment hike expected this year.  It is also IBM’s 17th year in a row that it has increased its quarterly cash dividend.  It also marks the ninth year in a row of double-digit percent increases.  The current dividend yield of 1.48% will rise to about 1.68%.

IBM has also authorized an additional $7 billion in funds for its stock repurchase program.  This $7 billion is in addition to approximately $5.7 billion remaining at the end of March from a prior authorization, implying that IBM actually has a total of $12.7 billion in total authorization under its stock repurchase program.

Where this gets interesting is that IBM is within a few percentage points of an all-time high and the company today noted that the company expects to request even more funds for share buybacks at the October 2012 board meeting. The company now claims to have reduced its share count by a third since the beginning of 2000.

Here is that $230 IBM Street-High Price Target call.  The old consensus target was closer to the current share price, but now that the earnings report came out the Thomson Reuters consensus price target objective is listed as $216.45.

IBM shares are up 1.6% and just under $202.00 with a 52-week range of $157.13 to $210.69.

JON C. OGG

The Dow Jones Survey noted that the DJIA companies expected to pay out over $6 billion in 2012 (annualized) are as follows:

AT&T, Inc. (NYSE: T) was expected to be at $10.5 billion in indicated annual dividends.  It is the highest yield of about 5.7% in the DJIA.

Exxon Mobil Corporation (NYSE: XOM) is expected to be $9.1 billion in indicated annual dividends.  This is the largest market cap in the DJIA of over $400 billion, so even a 2.2% yield generates a lot in raw dollars.

General Electric Co. (NYSE: GE) is expected to pay out $7.2 billion in its indicated annual dividends.  GE’s yield is now about 3.5%.

Pfizer Inc. (NYSE: PFE) is expected to be at $6.8 billion in indicated annual dividends. Pfizer’s yield is about 3.9% today.

Chevron Corporation (NYSE: CVX) is expected to be $6.5 billion in indicated annual dividends.  Chevron is worth about half of Exxon in market capitalization but it offers a yield of about 3.2%.

Johnson & Johnson (NYSE: JNJ) is expected to be $6.2 billion in indicated annual dividends.  J&J yields about 3.6%.

Microsoft Corporation (NASDAQ: MSFT) is expected to be $6.0 billion in indicated annual dividends.  Microsoft yields about 2.5%, which is not great for a DJIA stock but still high for a tech stock considering its recent rally.

Procter & Gamble (NYSE: PG) is expected to be $5.8 billion in indicated annual dividends.  P&G yields about 3.3%.

AT&T Inc. (NYSE: T), Exxon Mobil Corporation (NYSE: XOM), and General Electric Co. (NYSE: GE) are considered to be the top three payers accounting for 9.2% of all dividends paid by stocks.

The six DJIA companies which have recently increased their payouts are as follows: Cisco Systems, Inc. (NASDAQ: CSCO) with a 33% hike but still with a low payout rate; J.P. Morgan Chase & Co. (NYSE: JPM) by 20% even if we were disappointed with its dividend hike; Pfizer Inc. (NYSE: PFE) by 10%; Wal-Mart Stores, Inc. (NYSE: WMT) by almost 9%; The Coca-Cola Company (NYSE: KO) by 8.5%; and 3M Co. (NYSE: MMM) by almost 7.3%.

Speaking of high-yield and value, the utility sector is looking ripe in value after the shares have pulled back about 10% from their highs with dividend yields of 5% and more in the top four picks expected to still grow.

Dividend investors have had to be a bit more patient in 2012, but the trend for higher payouts appears to still be in place.

JON C. OGG

The company authorized the repurchase up to $2 billion in common stock through the end of fiscal 2015. While the company noted that this will return value to its stockholders, it also came with the admission that this will minimize the dilution from stock issuances.  And while the repurchases were slated for the open market, Adobe also noted that it plans to enter into structured repurchase agreements with third parties. The last issue is the company noted is that this new buyback is “substantially similar to the company’s previous program authorizing the repurchase of up to $1.6 billion in common stock through fiscal 2012, which authority has been exhausted.”

The opinion of 24/7 Wall St. is that stock buybacks of this magnitude are the strategy of yesterday’s managers.  The stock is not exactly expensive at 13.7-times this year’s expected earnings of $2.44 EPS, but it is also not exactly cheap in a market where great technology leaders and great banks are trading at far lower multiples.

Perhaps the biggest sin here is that Adobe still pays no dividend.  The company came public back in 1986 and it currently pays no real dividend after more than 25 years of being public.  Management said this is meant to reaffirm the confidence and optimism in its long-term future and to return value to shareholders.  Nothing commits to long-term earnings more than a stable dividend as a commitment to ongoing earnings, and buybacks merely offset dilution and/or decrease the share count.

Adobe has nearly $3 billion in cash, short-term investments and long-term investments and it has only about $1.5 billion in long-term debt.  This company can afford to pay a dividend and that dividend could rather easily be $0.20 per quarter (or $0.80 per year) without coming close to the 40% rule of more established companies on the payout ratio against earnings.  A dividend of $0.80 per year would come to a yield of about 2.4% and that would be a higher starting point compared to when other tech giants have started paying dividends.

The trouble with Apple Inc. (NASDAQ: AAPL) is still an issue over Flash, even if some workaround Apps mitigate this.  Some consider Microsoft Corporation (NASDAQ: MSFT) as competition, but Adobe is often in a class of its own with Acrobat, Flash, and analytics metrics.  Microsoft pays a large dividend and even Apple has now committed to start on a dividend paying strategy.

Investors tend to yawn over most share buybacks and they tend to get excited about their capital getting returned to them via dividends.  Adobe just maintained a strategy that was more of the same.  At $33.55, the 52-week trading range is $22.67 to $35.99.  Analysts have only a $34.72 consensus price target according to Thomson Reuters, implying very limited upside unless new developments occur.

JON C. OGG

The revenue compares to $30.8 million with income of $1.8 million a year ago.

magicJack had a cash balance of $49.0 million and 23,076,112 shares outstanding at the end of the first quarter 2011 and noted: “Comparing first quarter 2011 cash balances to first quarter 2012 saw an increase of $11.5 million even after the Company bought back over 2 million shares in this time frame.”

The Company hopes to reach the upper limits of its previous expectations of 20% to 30% annual revenue growth in 2012 and also $1.25 to $1.50 in earnings per share.  Thomson Reuters has estimates of $1.14 EPS and $153.46 million in sales, but we would note that there are too few analysts to really count as a ‘consensus’ in normal stocks.

magicJack shares are indicated up 4% at $21.75 and the 52-week trading range is $9.49 to $28.22.

JON C. OGG

Jamie Dimon noted, “Your company earned a record $19.0 billion in 2011, up 9% from the record earnings of $17.4 billion in 2010.  Our return on tangible equity for 2011 was 15% — the same as last year.  Relative to our competitors and given the prevailing economic environment, this is a good result. On an absolute and static basis, we believe that our earnings should be $23 billion – $24 billion.”

The 38 page document talked about mortgage-related losses and he noted that the hostility toward the banking industry continues.

Jamie Dimon noted that the bank bought back $9 billion of stock and that it was recently granted permission to buy back up to $15 billion more during the remainder of 2012 while lifting the dividend from $1.00 per share to $1.20 per share on an annualized basis.  While this was a good thing, here is why this dividend hike should have been taken as a disappointment by Wall Street and Main Street investors alike.

Dimon’s full annual letter is here.

JON C. OGG