Wells Fargo's dividend yield nears decade high for Big Six bank
Wells Fargo is once again flirting with something that no major U.S. bank has done in a decade: have a dividend yield north of 4%.
Don't expect a celebration.
The spike in the yield comes as the result of sliding shares rather than profit growth. Wells Fargo dropped as much as 1% in early trading Wednesday after gaining 2.5% to start the week. It's indicated dividend yield now sits at 3.8%, slightly below the 3.9% it hit at the end of last year.
Morgan Stanley was the last of the big-six banks to see its indicated dividend yield above 4% and that only happened in the wake of the global financial crisis. JPMorgan Chase came closest before Wells Fargo. Its indicated yield rose to 3.87% in 2012 during the height of the London Whale controversy.
High dividend yields can present a buying opportunity for investors, but analysts who cover the company have presented a gloomy outlook for the shares.
Wells Fargo's shares "are likely to remain 'dead money,' " Buckingham's James Mitchell wrote in a note. Goldman Sachs Group Inc. analysts cut their outlook for the bank on concerns about how long it will take to replace former Chief Executive Tim Sloan and their lowered 2019 net interest income forecast.
For the time being, Wells Fargo's positive dividend health score — a proprietary model of profitability, cash flow and leverage metrics — should reassure investors that there's no dividend cut on the horizon and the higher yield relative to its peers and history may draw investors back in.