JPMorgan Aims To Return An Unprecedented $31.5 Billion In Cash To Shareholders In The Next Year

JPMorgan (NYSE:JPM) is looking to return $31.5 billion in cash to shareholders over the next twelve months, after the Federal Reserve signed off on its capital plan as a part of it annual stress test for banks. Notably, the 2018 capital plan represents a 16% jump from the $27 billion payout in the previous plan – making it the largest payout announced by any U.S. bank. Also, if JPMorgan adheres to this plan, then its total payout for full-year 2018 should be more than $29 billion – making it the highest payout in a single year by any U.S. bank, as it surpasses the current record of $22.7 billion for JPMorgan in 2017.

The diversified banking giant’s capital return plan includes a 40% hike in quarterly dividends from the current level of 56 cents a share to 80 cents a share, which works out to total dividends of over $10.8 billion assuming average outstanding shares of 3.4 billion. Taken together with the new $20.7 billion share buyback program, this equals the record $31.5 billion payout. We capture the trends in JPMorgan’s dividend payout as well as share repurchases over the years in an interactive dashboard, along with our forecast for these key metrics.

We are currently in the process of updating our price estimate for JPMorgan’s stock to factor in the significantly higher-than-expected capital returns for the year.

See our full analysis for JPMorgan Chase here

Increasing Capital Returns

JPMorgan has been fairly liberal with its policy of returning cash to investors over the years, with the bank splitting its payouts almost equally between dividends and share repurchases over the years. The banking giant paid 34 cents in quarterly dividends for more than six years (Q2 2001 to Q2 2007), until it revised it upwards to 38 cents in the third quarter of 2007 – only to slash it to 5 cents in Q2 2009 in the wake of the economic downturn. The bank hiked dividends five-fold to 25 cents in Q2 2011, and has gradually increased this figure over the years to reach the current level of 56 cents per share. Dividends are now expected to remain at 80 cents per share over Q3 2018 – Q2 2019.

JPMorgan has paid out at least $2 billion to investors each year since 2005 despite the economic downturn of 2008, with the figure reaching $22.7 billion in 2017 – a record for any U.S. bank. Over the last ten years, the bank has returned $100.8 billion in cash to common shareholders, an average of $10 billion a year – representing about 58% of its average retained earnings of $17.1 billion for this period. At the same time, the fact that the total dividend payout over this period has been roughly $48 billion, while share buybacks have cost the bank $53 billion, shows that JPMorgan does not appear to prefer one method of returning cash over the other.

The chart below details JPMorgan’s total shareholder payout for each year since 2012, and includes our forecast for the next four years.

JPMorgan announced dividends of 56 cents a share for each of the first two quarters of the year, and is expected to increase this to 80 cents a quarter for the second half, for total dividends of $2.72 per share in 2018. Assuming that JPMorgan’s average share count for this year is around 3.4 billion, its dividend payout for 2018 is likely to be $9.2 billion. Also, at the end of 2017, the bank had authorization in place to repurchase $9.8 billion in shares over the first half of 2018. The bank repurchased shares worth $4.7 billion in Q1, and we expect it to have used up the remaining $5.1 billion for buybacks in Q2. Taken together with $10.35 billion in proposed purchases for the rest of the year (half of the total proposed repurchases of $20.7 billion), this points to total share repurchases of $20.15 billion in 2018.

We represent dividend payouts and share repurchases in our analysis of JPMorgan Chase in the form of an adjusted dividend payout rate, as shown in the chart below. You can see how a change in the bank’s policy of returning cash to investors affects its share price by making changes here.

If you don’t agree with our forecast, you can come up with your own by making changes to our interactive dashboard for JPMorgan’s dividend payout and share repurchases.

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