Capital One Financial Corporation (COF) is the latest financial company to cut its dividend. Capital One decreased its quarterly payment to $0.05/share from $0.375 in an effort to preserve more than $500 million in capital annually.
Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer said "We're moving today to reduce future dividends because in today's unprecedented economic and market conditions, our highest priority is managing our balance sheet to maintain its considerable strength and resilience. In addition, our ongoing dialogue with investors indicates that they value strong capital positions over dividend streams at this point in the cycle. Today's announced action is one of the most efficient ways to support capital levels in the current environment. The capital we preserve through the reduced dividend will reinforce our already-strong capital position, increase our flexibility to manage through the downturn, and enhance our ability to repay the U.S. Treasury Department's preferred stock investment as soon as it is prudent and appropriate to do so. When the economy recovers, we expect that returning capital to shareholders will once again be a key part of how we deliver value over the long-term."
The problem with Capital One however is that it was never a true dividend growth stock. It pretty much paid the same quarterly dividend of $0.0267 for 13 years. Then in January 2008 the company increased its dividend to $0.375 and initiated a $2 billion stock buyback program. Investors.
Because Capital One never had any record of consistently increasing dividends, I doubt that any dividend growth investors suffered as a result. The company that charges exorbitant rates to credit card holders should have rewarded shareholders better by sharing its prosperity through consistent dividend increases. The current dividend payment is still twice the size of the dividend payment in place over the whole 1995- 2007 period. I would not have been a holder of this stock as it never raised its dividend consistently even for ten years, unlike Citigroup, Bank of America, US Bancorp and Wells Fargo. Nevertheless I would consider selling Capital One (COF) shares as one never knows when their equity would be diluted by TARP preferred shares that the government owns. In November, 2008, Capital One Financial Corporation was the recipient of $3,555,199,000.00 of the Emergency Economic Stabilization Act Federal bail-out in the form of a preferred stock purchase.
If you still hold any financial shares and hope to generate dividends from them, check out whether your company that you own shares is on the TARP recipient list. If it is, chances are it will cut or suspend its dividend to you the shareholder. The typical excuses used by CEO’s are that this would make the company stronger and maintain its liquidity, or that would enable the company to repay the TARP money back. The best comment is that once the situation stabilizes, the dividend would once again become a priority.
Full Disclosure: None
Relevant Articles:
- When to sell my dividend stocks?
- TARP is bad for dividend investors
- Dividend Cuts - the worst nightmare for dividend investors.
- Wells Fargo Joins the Crowd of Dividend Cutters
Popular Posts
-
I review the list of dividend increases every week, as part of my monitoring process . I usually focus my attention on the companies with a...
-
I review the list of dividend increases every week, as part of my monitoring process. This process helps me identify companies for further r...
-
Charlie Munger is Warren Buffett’s business partner at Berkshire Hathaway. He is a successful lawyer, and investor, who was instrumental i...
-
One of the most common questions I receive relates about the idea of how to invest a lump-sum amount. I believe that the answer is not a one...
-
I review the list of dividend increases each week, as part of my monitoring process. There were 39 companies that increased dividends over t...
-
Paychex, Inc. (PAYX) provides payroll, human resource (HR), retirement, and insurance services for small to medium-sized businesses in the U...
-
The goal of this website is to inspire readers to identify their goals and objectives, and then create a process to achieve them. I shared t...
-
Atmos Energy Corporation (ATO) engages in the regulated natural gas distribution, and pipeline and storage businesses in the United States. ...
-
As part of my monitoring process, I review the list of dividend increases. This process helps me review how the companies I own are doing. I...
-
Johnson & Johnson (JNJ), together with its subsidiaries, is engaged in the research and development, manufacture, and sale of various p...