These 4 Big Banks Pay Similar Dividends. Their Balance Sheets Tell Another Story
America's four biggest banks all raised their dividends recently and their yields sit within a razor-thin range, but their balance sheets reveal a safety gap that separates a fortress payer from a bank that cut its payout as recently as…
All four of America’s largest banks have raised their quarterly payouts within the past six months: JPMorgan Chase (NYSE:JPM | JPM Price Prediction), Citigroup (NYSE:C), Wells Fargo (NYSE:WFC) and Bank of America (NYSE:BAC). Even so, the group’s best yield is only 2.3%. Because the yields are so close, what separates these four for an income portfolio is strength. That means how much of each bank’s earnings the dividend uses, how much capital sits above the regulatory floor, and what each board did the last time a crisis hit. Every one of these banks has cut its dividend at least once in the modern era, so a bank’s track record matters as much as its current payout (we laid out the seven warning signs that a big yield is about to be cut in a free report here).
JPMorgan Chase: The Fortress Payer With the Thickest Capital Cushion
JPMorgan yields 1.83% at a share price near $333. Among the four, the yield is the lowest, but the safety numbers are the strongest. The board just raised the quarterly dividend to $1.65 from $1.50, for an annualized forward payout of $6.60 per share.
Safety read: Trailing dividends of $6.15 against diluted EPS of $23.84 give a payout ratio of about 25.8%. JPMorgan ended the third quarter with a standardized CET1 ratio of 13.9%, the highest in this group. CEO Jamie Dimon estimated “probably $30 billion or something of excess capital”, and the bank holds $1.5 trillion of cash and marketable securities. The track record is mixed but solid. JPMorgan cut its quarterly payout from $0.38 to $0.05 in 2009. In 2020, though, it held the dividend at $0.90 per quarter and has raised the payout repeatedly since then.
Bull case: Dimon puts the dividend at the top of the capital list: “After you pay your dividend, which hopefully will be steady, we really like investing in organic growth.” Third-quarter ROTCE of 20% is above the bank’s through-cycle target of 17%. That gives income holders room for error, at a forward P/E of 14.
Risk: The trailing earnings include a one-time $4.6B Visa gain from the second quarter, so the payout ratio looks better than core earnings alone would justify. CFO Jeremy Barnum also warned that current conditions “are not typical by historical standards.”
Citigroup: Lowest Payout Ratio Behind a Turnaround That Is Starting to Pay
Citigroup yields 2.03% at about $122.61. The quarterly dividend rose to $0.67 from $0.60, a 12% increase, for an annualized forward payout of $2.68.
Safety read: Trailing dividends of $2.47 against EPS of $10.26 put the payout ratio near 24.1%, the lowest of the four. CET1 stands at 12.8% against an 11.6% requirement, a margin of roughly 120 basis points. Citi also has more than $1 trillion of available liquidity. Its history carries a deep mark: the payout fell to $0.01 in 2009 and stayed there until 2015. During the pandemic, however, Citi held its dividend at $0.51 without cutting it, and it has since raised the payout four times.
Bull case: Profitability is finally improving. Third-quarter ROTCE reached 11.5%, and management is aiming for 14% to 15% over the longer term. Year-to-date buybacks of $13.3 billion show that capital is flowing back to shareholders. CFO Gonzalo Luchetti put the framework this way: “We hold capital for resilience and flexibility, and we deploy it for returns and to distribute it to shareholders.” The forward P/E is just 10.
Risk: Citi assumes its regulatory minimum will rise to 13.1% starting in January 2028, which is above today’s ratio. The bank also expects a roughly $9 billion CTA-related loss to run through earnings in early 2027 as it deconsolidates Banamex. Management expects that process to be slightly accretive to CET1, but buyback flexibility could tighten.
Wells Fargo: Strong Raises, but the Most Recent Dividend Cut
Wells Fargo yields 2.26% at around $81.50. Its quarterly dividend rose to $0.50 from $0.45, for an annualized forward payout of $2.
Safety read: Trailing dividends of $1.85 against EPS of $7.12 produce a payout ratio of about 26.0%. CET1 is 10% against a minimum plus buffers of 8.5%, a margin of 150 basis points. CEO Charlie Scharf said the bank earns about $6 billion a quarter and that, after the dividend, this adds roughly 30 basis points to CET1 each quarter. The weak spot is the track record. Wells Fargo was the only one of the four to cut during the pandemic, slashing the quarterly payout from $0.51 to $0.10 in 2020. It has raised the dividend every year from 2022 through the latest increase, yet the payout is still $0.01 below where it stood before the cut.
Bull case: With the asset cap gone, the bank is growing again: average loans and deposits each rose 11% from a year ago. Third-quarter ROTCE of 16.3% is closing in on the 17% to 18% aim, and net charge-offs held at just 38 basis points of average loans. The forward P/E is 10.
Risk: Wells Fargo by design runs at the bottom of its 10% to 10.5% CET1 target range, and higher rates pulled the ratio down through AOCI losses last quarter. That leaves less spare capital if credit turns while the bank is expanding.
Bank of America: Highest Yield and Raises Every Year Since 2021
Bank of America offers the group’s top yield at 2.3%, with shares near $50.45. The quarterly dividend rose to $0.32 from $0.28, for an annualized forward payout of $1.28.
Safety read: Trailing dividends of $1.16 against EPS of $4.21 put the payout ratio near 27.6%. It is the highest of the four, but still conservative. CET1 is 10.9% against a 10% minimum. The bank returned $8.3 billion to shareholders last quarter, including $6 billion in buybacks. Funding is a real strength, with more than $2 trillion in deposits supporting $1.25 trillion of loans. In history, Bank of America cut its payout from $0.32 to $0.01 in 2009. It held at $0.18 through 2020 and has raised the dividend every year since 2021.
Bull case: CFO Alastair Borthwick described a simple order of priorities: “We know we have to support the regulatory minimum and the dividend, and then whatever is left, we’re going to return to shareholders.” Management expects net interest income to grow 8% or more next year, and card losses and delinquencies have improved for the sixth consecutive quarter. The forward P/E is 11.
Risk: Bank of America has the smallest regulatory margin of the four, at 90 basis points above the minimum, and management says buyback levels depend on final capital rules. Heavy loan growth could pressure that buffer further.
Ranking the Four: JPMorgan Owns the Safest Big Bank Dividend
JPMorgan ranks first. It pairs a payout ratio near 25.8% with the highest CET1 ratio in the group, around $30 billion of estimated excess capital, and an unbroken dividend through 2020. Citigroup ranks second on the lowest payout ratio and a wider margin than Bank of America, which ranks third on regular annual increases despite the smallest capital buffer. Wells Fargo comes last because its 2020 cut is the most recent flaw in the group, though its yield and growth make it the strongest recovery story among the four.
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Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
