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As intended after clearing the 2023 stress test, JPMorgan (JPM) has raised its quarterly dividend by 5% to $1.05 per share. The dividend will be paid out on Oct 31 to shareholders on record as of Oct 6.

Prior to this, JPM maintained the quarterly dividend at $1 per share despite passing the 2022 stress test. The company had cited higher future capital requirements amid macroeconomic woes as reasons for keeping the dividend unchanged.

Considering the last day’s closing price of $145.93, JPMorgan’s dividend yield (based on increased dividend) currently stands at 2.68%. The yield represents a steady income stream for investors.

This aside, JPM has a share repurchase plan in place. The company intends to continue with its previously announced share repurchase program to buy back shares worth $12 billion this year.

Apart from reflecting the company’s commitment to returning value to shareholders, such efforts indicate its healthy balance sheet position. As of Jun 30, 2023, it had a total debt worth $537.4 billion. The company's cash and due from banks and deposits with banks were $495.1 billion on the same date.

Further, strategic acquisitions, both domestic and international, are largely aiding JPMorgan’s financials. In August, it announced plans to increase its stake in Brazil's C6 Bank to 46% from 40%, while in June, the company formed a strategic alliance with Cleareye.ai, a financial technology firm focused on trade finance. In May, the company acquired the failed First Republic Bank (a FDIC-assisted deal).

This First Republic Bank is expected to be accretive to earnings and result in revenue synergies. While the interest rate hikes since March 2022 weighed on the company’s net interest income (NII) owing to rising funding costs, the acquisition will majorly support NII growth this year. JPMorgan is projecting NII to be approximately $87 billion in 2023 (up from the prior target of $84 billion).

Additionally, JPMorgan’s efforts to expand its footprint through branch opening in new regions will help it grab cross-selling opportunities by increasing its presence in the card and auto loan sectors. Apart from this, the company launched its digital retail bank Chase in the U.K. in 2021 and plans to further expand the reach of its digital bank across the European Union countries.

Thus, these factors are expected to keep JPMorgan financially stable despite several near-term challenges, including the volatile performance of fee income and weakening asset quality.

So far this year, shares of this Zacks Rank #3 (Hold) company have rallied 11% against the industry’s decline of 4.8%.

Image Source: Zacks Investment Research

Other Banks That Announced Dividend Hikes

Fifth Third Bancorp (FITB) announced a quarterly cash dividend of 35 cents per share, indicating an increase of 6% from the prior payout. The dividend will be paid out on Oct 16 to shareholders of record as of Sep 30.

This marks the eighth consecutive year of dividend hikes by FITB. Prior to the recent hike, it increased its dividend by 10% in September 2022.

Capital City Bank Group Inc. (CCBG) raised its quarterly cash dividends by 11.1%. The company will now pay out a dividend of 20 cents per share on Sep 25 to shareholders of record as of Sep 11.

Prior to the recent hike, it increased its dividend by 5.9% in February 2023. CCBG raised its quarterly dividend nine times in the last five years.

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