The Truth About JPM’s Dividend Plans

Sometimes I’m simply baffled by what gets reported in the news. Yesterday, JPMorgan Chase ($JPM) reported good earnings and at one point, the stock got over $47 per share.

The shares, however, slid during the rest of the day and close at $46.25. The stock is down close to $1 today.

The media reported that the stock fell after Jamie Dimon said not to expect another dividend increase. Here’s what the FT had to say:

Shares in the group were initially up 1.4 per cent, but retreated after Jamie Dimon, the chief executive, said the company would see no further dividend increases for several quarters. The shares finished 0.8 per cent lower at $46.25.

Let’s make something perfectly clear — there was absolutely nothing negative in what Dimon had to say. JPM has historically increased its dividend for Q1, and that’s exactly what they did. They raised the dividend from five cents per share to 25 cents per share.

Dimon said they need approval for another increase. He didn’t at all say it had to do with a lack of profits. Also, whether they pay the dividend or not has zero baring on the stock’s return to investors.

The only reason for the stock to be down is if there was some reason to believe that the profits would be down, and Dimon said nothing like that.

This is from TheStreet:

“I wouldn’t look for a dividend increase the next couple of quarters,” Dimon said on the earnings call, in response to an analyst question. “We would have permission to do a little bit more on the dividend, but we would have to ask regulators for an increase in this environment.”

That’s it. That’s all he said. If you knew nothing about JPM but its dividend history, you wouldn’t expect another dividend increase so soon. But you’d probably expect one a year from now. How could anyone read something negative into that? I have no idea but sometimes on Wall Street, the rule is sell first and ask questions later.

Posted by on April 14th, 2011 at 10:26 am


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