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Keep JPMorgan Stock on Your Radar on Dividend Hike Announcement
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JPMorgan (JPM - Free Report) has announced an increase in its quarterly dividend. The company declared a dividend of $1.25 per share, which marks an 8.7% rise from the prior payout. It will be paid out on Oct. 31, 2024 to shareholders of record as of Oct. 4. The hike is in line with JPMorgan’s previous announcement to hike its dividend after the clearance of the 2024 stress test.
Similarly to JPM, State Street (STT - Free Report) and PNC Financial Services (PNC - Free Report) raised their quarterly dividends as they cleared this year’s stress test. In July, STT announced a 10.1% increase in dividends, while PNC raised it by 3%.
This is the second dividend hike announced by JPMorgan this year. In February, the company announced a 9.5% increase in quarterly dividends. Raising quarterly dividends seems to be a way to reward its shareholders after notching record profits last year despite the turmoil in the banking industry and a challenging macroeconomic backdrop.
Based on yesterday’s closing price of $209.25, the company’s dividend yield currently stands at 2.2%.
JPMorgan has a share repurchase plan in place. In June, the company authorized a new share repurchase program of $30 billion, effective July 1, 2024. Management expects the pace of share buybacks to be modest in 2024 after having repurchased shares worth almost $9.9 billion last year.
JPMorgan has a solid balance sheet position. As of June 30, 2024, the company had a total debt worth $842.2 billion (the majority of this is long-term in nature). JPM's cash and due from banks and deposits with banks were $530.8 billion on the same date. It also maintains long-term issuer A-/AA-/A1 ratings from Standard and Poor’s, Fitch Ratings and Moody’s Investors Service, respectively.
Given a strong balance sheet position and earnings strength, the company is expected to sustain current capital distributions. This will enhance shareholder value.
Factors to Watch Before Taking Investment Decision on JPM
Interest Rate Cuts and Net Interest Income: At the Barclays Global Financial Services Conference on Sep. 10, the company's president and chief operating officer, Daniel Pinto, reiterated this year’s net interest income (NII) guidance while warning about a potential decrease in the metric next year because of interest rate cuts.
For 2024, NII is expected to be approximately $91 billion, up from $89.3 billion in 2023. Nonetheless, as the Federal Reserve is all set to cut interest rates, it will hurt JPMorgan’s NII in 2025. At present, the interest rates are at a 23-year high of 5.25-5.5%. Pinto noted that rates are anticipated to decline 250 basis points by 2025-end. While lower rates would lessen deposit repricing pressure, it also means lower interest income.
Pinto stated that $90 billion NII as the consensus mark for 2025 “is not very reasonable.” He added, “So I think that, that number will be lower. We are not going to guide on that now, but the $90 billion is a bit too high.”
Expansion Initiatives: JPMorgan is expanding its footprint in new regions despite the proliferation of mobile and online banking options. In February, the company announced plans to open more than 500 branches by 2027. This initiative will solidify its position as the bank with the largest branch network and a presence in all 48 states in the United States.
Earlier in 2018, the bank announced plans to enter 25 new markets by opening new branches. In addition to enhancing market share, the strategy continues to help JPM grab cross-selling opportunities by increasing its presence in the card and auto loan sectors.
JPMorgan is also committed to renovating 1,700 existing locations by 2027-end to serve its customers better. The company launched its digital retail bank Chase in the U.K. in 2021 and plans to expand the reach of its digital bank across the European Union countries. JPMorgan is also focused on bolstering its presence in China, Africa and many European countries.
Rebound in Investment Banking (IB) Business: While global deal-making came to a grinding halt at the beginning of 2022, JPMorgan continued to rank #1 for global IB fees. Though the company’s total IB fees (in the CIB segment) plunged 59% in 2022 and 5% in 2023, the trend is reversing of late.
In the first six months of 2024, JPM’s IB fees jumped 35% year over year, with the company having a wallet share of 9.5%. JPMorgan is likely to witness growth in IB fees going forward, driven by a healthy IB pipeline and active merger & acquisition (M&A) market, and leverage its top position to gain from the changed scenario.
At the conference, Pinto stated the third quarter of 2024 is expected to be a “solid” one for JPMorgan’s IB business, with corresponding fees projected to jump 15% year over year. This will be driven by robust performance in debt and equity capital markets.
Pinto said, “We are expecting in debt capital markets volumes in institutional loans and leveraged loans almost double, it will double from last year.” Merger & acquisition (M&A) volumes are expected to be “flattish.”
Our Take on JPMorgan Stock
This year, shares of JPM have rallied 23.1%, outperforming the industry’s growth of 17.2%.
Image Source: Zacks Investment Research
Given the recent solid price performance, JPM stock is trading at a premium. Its forward 12-month earnings multiple of 12.45X, compared with the industry’s 11.25X, indicates a stretched valuation.
Image Source: Zacks Investment Research
Considering the company’s strong fundamentals and upbeat third-quarter outlook, investors should think about investing in JPMorgan for solid long-term gains. However, they should keep an eye on the company’s high valuation, cautious NII guidance for next year and the central bank’s future course of action.
Investors must analyze the impact of these on JPMorgan’s financials before making any investment decision. Those who already own the stock in their portfolio can retain it because it is less likely to disappoint over the long term, given strong fundamentals.
JPMorgan (JPM - Free Report) has announced an increase in its quarterly dividend. The company declared a dividend of $1.25 per share, which marks an 8.7% rise from the prior payout. It will be paid out on Oct. 31, 2024 to shareholders of record as of Oct. 4. The hike is in line with JPMorgan’s previous announcement to hike its dividend after the clearance of the 2024 stress test.
Similarly to JPM, State Street (STT - Free Report) and PNC Financial Services (PNC - Free Report) raised their quarterly dividends as they cleared this year’s stress test. In July, STT announced a 10.1% increase in dividends, while PNC raised it by 3%.
This is the second dividend hike announced by JPMorgan this year. In February, the company announced a 9.5% increase in quarterly dividends. Raising quarterly dividends seems to be a way to reward its shareholders after notching record profits last year despite the turmoil in the banking industry and a challenging macroeconomic backdrop.
Based on yesterday’s closing price of $209.25, the company’s dividend yield currently stands at 2.2%.
JPMorgan Chase & Co. Dividend Yield (TTM)
JPMorgan Chase & Co. dividend-yield-ttm | JPMorgan Chase & Co. Quote
JPMorgan has a share repurchase plan in place. In June, the company authorized a new share repurchase program of $30 billion, effective July 1, 2024. Management expects the pace of share buybacks to be modest in 2024 after having repurchased shares worth almost $9.9 billion last year.
JPMorgan has a solid balance sheet position. As of June 30, 2024, the company had a total debt worth $842.2 billion (the majority of this is long-term in nature). JPM's cash and due from banks and deposits with banks were $530.8 billion on the same date. It also maintains long-term issuer A-/AA-/A1 ratings from Standard and Poor’s, Fitch Ratings and Moody’s Investors Service, respectively.
Given a strong balance sheet position and earnings strength, the company is expected to sustain current capital distributions. This will enhance shareholder value.
Factors to Watch Before Taking Investment Decision on JPM
Interest Rate Cuts and Net Interest Income: At the Barclays Global Financial Services Conference on Sep. 10, the company's president and chief operating officer, Daniel Pinto, reiterated this year’s net interest income (NII) guidance while warning about a potential decrease in the metric next year because of interest rate cuts.
For 2024, NII is expected to be approximately $91 billion, up from $89.3 billion in 2023. Nonetheless, as the Federal Reserve is all set to cut interest rates, it will hurt JPMorgan’s NII in 2025. At present, the interest rates are at a 23-year high of 5.25-5.5%. Pinto noted that rates are anticipated to decline 250 basis points by 2025-end. While lower rates would lessen deposit repricing pressure, it also means lower interest income.
Pinto stated that $90 billion NII as the consensus mark for 2025 “is not very reasonable.” He added, “So I think that, that number will be lower. We are not going to guide on that now, but the $90 billion is a bit too high.”
Expansion Initiatives: JPMorgan is expanding its footprint in new regions despite the proliferation of mobile and online banking options. In February, the company announced plans to open more than 500 branches by 2027. This initiative will solidify its position as the bank with the largest branch network and a presence in all 48 states in the United States.
Earlier in 2018, the bank announced plans to enter 25 new markets by opening new branches. In addition to enhancing market share, the strategy continues to help JPM grab cross-selling opportunities by increasing its presence in the card and auto loan sectors.
JPMorgan is also committed to renovating 1,700 existing locations by 2027-end to serve its customers better. The company launched its digital retail bank Chase in the U.K. in 2021 and plans to expand the reach of its digital bank across the European Union countries. JPMorgan is also focused on bolstering its presence in China, Africa and many European countries.
Rebound in Investment Banking (IB) Business: While global deal-making came to a grinding halt at the beginning of 2022, JPMorgan continued to rank #1 for global IB fees. Though the company’s total IB fees (in the CIB segment) plunged 59% in 2022 and 5% in 2023, the trend is reversing of late.
In the first six months of 2024, JPM’s IB fees jumped 35% year over year, with the company having a wallet share of 9.5%. JPMorgan is likely to witness growth in IB fees going forward, driven by a healthy IB pipeline and active merger & acquisition (M&A) market, and leverage its top position to gain from the changed scenario.
At the conference, Pinto stated the third quarter of 2024 is expected to be a “solid” one for JPMorgan’s IB business, with corresponding fees projected to jump 15% year over year. This will be driven by robust performance in debt and equity capital markets.
Pinto said, “We are expecting in debt capital markets volumes in institutional loans and leveraged loans almost double, it will double from last year.” Merger & acquisition (M&A) volumes are expected to be “flattish.”
Our Take on JPMorgan Stock
This year, shares of JPM have rallied 23.1%, outperforming the industry’s growth of 17.2%.
Image Source: Zacks Investment Research
Given the recent solid price performance, JPM stock is trading at a premium. Its forward 12-month earnings multiple of 12.45X, compared with the industry’s 11.25X, indicates a stretched valuation.
Image Source: Zacks Investment Research
Considering the company’s strong fundamentals and upbeat third-quarter outlook, investors should think about investing in JPMorgan for solid long-term gains. However, they should keep an eye on the company’s high valuation, cautious NII guidance for next year and the central bank’s future course of action.
Investors must analyze the impact of these on JPMorgan’s financials before making any investment decision. Those who already own the stock in their portfolio can retain it because it is less likely to disappoint over the long term, given strong fundamentals.
Currently, JPM carries a Zacks Rank #3 (Hold). You can seethe complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.