Banks May Offer Dividend Growth Again in 2021
Monday, April 19, 2021
Out of the 22 large US banks, only Wells Fargo and Capital One (neither is owned by Miller/Howard) cut dividends during 2020. Banks proved to be a reliable source of dividends, even during a difficult period.
Large US Banks:
Source: Executive Summary of the Fed’s December 2020 Dodd-Frank Act Stress Test, page 2. The common equity tier 1 capital ratio is the primary metric the Fed uses to judge bank capital adequacy.
What’s more, bank balance sheets continue to be strong, even in the additional December 2020 stress test using COVID-19 recession scenarios. As a group, despite doubling the reserves set aside for potential (but not realized) loan losses, banks actually improved their capital metrics during 2020, as earnings were substantially more than dividends paid. The money is literally “in the bank,” meaning that excess capital has accumulated.
Importantly for us, the Fed recently announced that it will once again allow banks to increase their dividends, provided they pass the June 2021 stress test.
Until then, buybacks in the first half of 2021 reduce shares outstanding, making dividend increases more affordable.
Read the 1Q 2021 Quarterly Report ►
Adam Fackler, CFA, Chief Investment Officer, oversees Miller/Howard’s portfolio management team and is the designated lead or co-lead portfolio manager on the firm’s products. Prior to being named Chief Investment Officer, he served as Deputy Chief Investment Officer, and he focused on infrastructure companies including utilities, telecommunications, and midstream energy/master limited partnerships (MLPs). Previously, Adam spent 10 years in equity research, including five years at Rodman & Redshaw, KLR Group, and MLV & Co. where he covered exploration & production companies and MLPs. Adam holds a BS in Business Administration with a minor in Economics from Bucknell University.
John (Jack) E. Leslie III, CFA, focuses on diversified, dividend-paying stocks. He is a member of Miller/Howard's Board of Directors. Prior to joining Miller/Howard in 2004, Jack was a portfolio manager at Value Line Asset Management, M&T Capital Advisors Group (a division of M&T Bank Corp.), and Dewey Square Investors Corp. (now part of Old Mutual Asset Management). Jack earned his BS in Finance from Suffolk University and an MBA from Babson College.
Michael Roomberg, CFA, focuses on diversified, dividend-paying stocks as well as the energy sector. Before joining Miller/Howard, Michael served as head of water/infrastructure equity research at Ladenburg Thalmann & Co. in New York City. Prior to that he served on Jefferies’ Industrials equity research team. Michael began his career as a research associate at Boenning & Scattergood Inc., a financial services firm in greater Philadelphia, where he specialized in energy exploration & production, and water utilities and industrials. Michael earned his BA in International Relations, Economics, and Finance from University of Wisconsin-Madison. He holds an MBA from the McDonough School of Business, Georgetown University.
Mark Phillips, CFA, focuses on diversified, dividend-paying stocks, and he leads Miller/Howard's risk management efforts and quantitative portfolio analytics. Mark started in the financial services industry in 2012 as an investment analyst in Janney Montgomery Scott’s wealth management division in Philadelphia. Prior to that, he was a staff accountant at Danaher in Virginia. Mark earned a BS In Finance and a BA in Economics from Grove City College, in Pennsylvania.
