 MHI Blog 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 ►
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