January 11, 2011 / 9:58 PM / in 7 years

JPMorgan CEO says dividend may rise in 2011

2 Min Read

<p>JPMorgan Chase &amp; Co Chief Executive Jamie Dimon speaks at the Stanford Institute for Economic Policy Research at Stanford University in Palo Alto, California March 12, 2010.Robert Galbraith</p>

SAN FRANCISCO (Reuters) - JPMorgan Chase (JPM.N) is ready to pay an annual dividend of 75 cents to a dollar once the Federal Reserve completes stress-testing of the largest U.S. banks and gives its approval, Chief Executive Officer Jamie Dimon said on Tuesday.

The bank could raise its dividend as soon as the second quarter 2011, if it receives Fed approval, Dimon said in an interview with cable news channel CNBC after his keynote address at the JPMorgan Chase Healthcare Conference.

Dimon's comments come as the 19 largest U.S. banks -- including JPMorgan and rivals Bank of America Corp (BAC.N) and Citigroup Inc (C.N) -- are undergoing a second series of stress tests by the Fed since the 2008 financial crisis.

The Fed is gauging whether banks have enough capital to weather another economic shock, and are similar in structure to the first stress test in 2009.

If a bank passes, investors are expecting dividends to increase shortly thereafter.

JPMorgan currently pays an annual dividend of 20 cents, with a dividend yield of 0.4 percent.

A dividend of 75 cents to a dollar would generate a 1.7 percent to 2.2 percent yield.

The bank paid a 38 cents per share quarterly dividend in 2008 and the first quarter of 2009.

While banks are unlikely to return to large dividend payouts made before the financial crisis as profits soared, bank CEOs now are typically targeting a dividend payout equal to 30 percent of earnings.

Before the financial crisis of 2008, banks generally targeted dividend payouts of 40 percent of earnings.

Dimon also told an audience of investors at a bank-sponsored healthcare conference here that the greatest risk to the U.S. economy right now was the bulging fiscal deficit.

JPMorgan shares closed up 0.46 percent on Tuesday at $43.60 on the New York Stock Exchange.

Reporting by Noel Randewich; Additional reporting by Joe Rauch in Charlotte, North Carolina; Editing by Carol Bishopric

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