The financial industry played a major role in the recent economic crisis, and as a result, the Federal Reserve has been doing periodic stress tests on the nation's biggest banks to make sure they are prepared for another shock to the economy.
Earlier this month, the central bank ran another set of tests, with the vast majority of banks receiving passing grades. When the Federal Reserve released its results, 17 out of the 18 banks it tested had passed the tests, with Ally Financial (GMA) being the lone bank that failed to make the grade. While the vast majority of stocks passed the tests, not all were able to garner full approval for the capital distribution plans.
Wells Fargo (WFC)
The Federal Reserve not only gave Wells Fargo a passing grade on its stress test, but also approved its plans for a dividend hike and additional share buyback. Wells Fargo currently pays a quarterly dividend of 25 cents per share, but plans to boost its quarterly dividend to 30 cents for the second quarter of the year. The company's board of directors will meet in April, and at that meeting it will vote to approve the dividend hike as well as additional share buybacks in order to return more capital to shareholders. We like Wells Fargo, but the stock is in a strong upward trend, and we would prefer to let the stock pull back a bit before setting up any new positions. Consider buying the stock under $37.
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