Wells Fargo Makes Difficult Decision To Cut Dividend
- March 6, 2009
- Dividend Stocks
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Wells Fargo (WFC: 30.58 -0.16%) announced this morning that they are slashing their quarterly dividend by 85% to $.05 per share.
The dividend yield is now at 2.5%, down from 16.7%.
“This was a very difficult decision but it’s absolutely right for our Company and our shareholders because it will further strengthen our ability to grow market share and to continue our long track record of profitable growth,” said President and CEO John Stumpf. “We will return to a more normalized dividend level as soon as practical. We have among the most loyal shareholders in America – individuals and institutions alike – and we’ve always recognized the value of dividends. Operating results for the first two months of the year are strong. Our ability to grow market share in this environment and to benefit from new business opportunities remains second to none. Our merger with Wachovia is on track and we remain as optimistic as ever about its potential benefits for all our stakeholders.”
Reducing the dividend payment is expected to save the company $5 billion which will provide insulation if a more adverse credit cycle occurs.
The markets reacted very positively to news of the dividend cut, sending Wells Fargo’s shares up 13% to $9.17. This year has been particularly difficult for Wells Fargo investors who have seen the stock lose 72% of its value since the beginning of the year.
With no end in sight to this current economic recession, making the tough decisions to drastically reduce dividend payments and cost structures are prudent moves.
