J.P. Morgan Chase & Co. (JPM) posts strong results while raising dividend 4%

J.P. Morgan’s (NYSE:JPM) dividend was increased by a solid 4 percent. Its overall yield is 2.28 percent. The firm started paying a dividend in 1993.

J.P. Morgan Chase is one of the largest banking and financial firms within the United States. The financial giant holds more than $2 trillion in assets.  It is a global firm with offices in over twenty countries. It operates under key segments including banking, investment baking, asset management, and credit cards.   It also offers treasury services, risk management, and market research. The firm was founded in 1799 and is located in New York City.

J.P. Morgan has maintained a solid three-year growth rate of dividends of 7.4 percent. J.P. Morgan currently ranks 4th in yield within the financial, money center banks category. The quarterly dividend for the April payment will be $0.50 versus the prior year rate of $0.48 per share.  J.P. Morgan is a member  of our Top 100 Dividend Stocks.  (see below).

top-100

The dividend will be paid at the new higher rate on April 30, 2017, to shareholders of record at close of business on April 6, 2017. J.P. Morgan Chase & Co. is currently priced at $85.10. Listed in the table below are the quarterly dividend payments since 2010.

Date Quarterly Dividend
4/6/2017 0.5
1/4/2017 0.48
10/4/2016 0.48
7/1/2016 0.48
4/4/2016 0.44
1/4/2016 0.44
10/2/2015 0.44
7/1/2015 0.44
4/1/2015 0.4
1/2/2015 0.4
10/2/2014 0.4
7/1/2014 0.4
4/2/2014 0.38
1/2/2014 0.38
10/2/2013 0.38
7/2/2013 0.38
4/3/2013 0.3
1/2/2013 0.3
10/3/2012 0.3
7/3/2012 0.3
4/3/2012 0.3
1/4/2012 0.25
10/4/2011 0.25
7/1/2011 0.25
4/4/2011 0.25
1/4/2011 0.05
10/4/2010 0.05
7/1/2010 0.05
4/1/2010 0.05
1/4/2010 0.05

We examine J.P. Morgan upon our five key criteria, which include; 

Quantitative Analysis:

Category Value Score
Dividend Yield 2.37% 246
Dividend Growth (3 to 7 year avg) 37% 33
Forward P/E 12.8  47
S&P Financial Rating A+ 120
Beta 1.20 175
Total Score   621

Additional quantitative information on P/BV ratio and historical yield;

% Yield 3 Year Div. Growth Rate 7 Year Div. Growth Rate BV 2017 P/BV Ratio 10 yr P/BV Low 10 yr P/BV High 5 yr lowest Yield % 5 yr max Yield %
2.37% 7.4% 6.7% 68.55 1.28 0.80 2.05 2.07% 3.23%

Positives;

  • J.P. Morgan maintains an investment grade credit rating.
  • J.P. Morgan has maintained a three-year growth rate of dividends of  7.4 percent.
  • J.P. Morgan’s dividend yield is above that of the S&P 500 Index.

Negatives;

  • J.P. Morgan’s current dividend yield (2.37%) is below it’s five-year average of 2.65%.
  • J.P. Morgan maintains a beta of 1.20, higher than the average company.

Latest Earnings Analysis:

J.P. Morgan issued its last earnings data last week. The banking giant reported first-quarter earnings and revenue that well topped estimates.  Enhanced loan growth and excellent trading boosted both the top and bottom lines. Earnings per share for Q1 of 2017 came in at $1.65 versus $1.52 expected by Thomson Reuters analysts’ consensus estimates. As for the top line, revenue was $25.5 billion.  This was higher than the average estimate of $24.8 billion.  Trading revenue was much higher than expected, coming in at $6.5 billion.  This was $1 billion more than anticipated by the street.

Average core loans grew by 9 percent year over year, much higher than the 2 percent estimate.  Investment banking was also a key segment for growth. Bond trading rose by 17 percent from Q1 of 2016. J.P. Morgan Chase saw improvement in expense control as well. Its provision expense fell by just over $500 million in Q1, which was over half of its $928 million increase in net income.  The increase in interest rates by our Federal Reserve also assisted revenue.  Its net interest margin on the $2.2 trillion of interest-earnings assets went up year-over-year by 0.11%, or 11 basis points.

Asset and wealth management was also strong with assets at $1.8 trillion, up 10 percent versus last year’s Q1.  Average loan balances grew by 7 percent to $118 billion.  Return on equity came in at a stellar 11 percent.

Yearly Results;

2016 2015 2014 2013 2012
Earnings per Share 6.19 6 5.29 4.35 5.2
Annual Dividend 1.88 1.72 1.58 1.44 1.2
Payout Ratio 30.37% 28.67% 29.87% 33.10% 23.08%
The bank maintained minimal charge-offs during Q1.  They came in at a mere $1.7 billion during the quarter, well below most estimates. $300 million in reserves were released. Over the last decade, J.P. Morgan has become the largest and most premier bank in the United States. The firm maintains a sizeable deposit base of nearly $1.5 trillion.  The firm is also the second largest provider of credit cards, a very profitable business line. Its trading department, as Q1 shows, is top-notch along with its strong positions in currency management.
The banking giant has become a very diversified financial firm, not just a traditional bank. But it takes on much less risk than firms like Goldman Sachs.  The firm has one of the highest common equity Tier 1 ratios, 12.5 percent. The firm is trading at 12.8 our earnings estimate for next year.  It trades at a modest 1.2 times book value, well below the 2 times it reached ten years ago. It’s A plus credit rating and strong 7 percent dividend growth rate make it a strong candidate for inclusion in a dividend portfolio. We also expect an acceleration of its dividend growth rate next year as its payout ratio remains very low versus its large cap peers.
Earnings per Share 2017 (projected) $6.60
Dividend 2.00
Payout Ratio 31.25%
Based on the firm’s premium profile, consistent dividend growth, moderate valuation, and investment grade rating, J.P. Morgan qualifies as a member of our  Top 100 Dividend Stocks
Please subscribe to our monthly premium newsletter to find out more which stocks are listed in our 30 stock model portfolio.  

J.P. Morgan Chase & Co. Dividend Yield Chart (Click to enlarge)

Chart Explanation:  Dividend growth stocks may be viewed favorably when the current yield is above historical readings for the past 5 years.

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