Less burdened by credit problems that plague other major banks, Wells Fargo & Co (WFC) could see strong earnings and dividend growth in 2014, according to William Schnieders, founder of Schnieders Capital Management, LLC.
“We think that they are, first of all, on track to earn that $4 a share because they have improving credit quality and we see an expansion in housing as benefitting Wells Fargo,” Schnieders said. “They accounted for close to 40% of all mortgage originations last year and have picked up their share of that market. We also see them as less exposed to credit problems overseas as the other major banks.”
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Schnieders said Wells Fargo has historically paid 40% to 50% of earnings in dividends, and he said dividend levels could again begin to approach those levels in 2014.
“The earnings projected for 2014 are right around the $4 area and we know that their dividend has increased from $0.20 level in 2010, down from the financial debacle that we had back to $0.88 last year, and it’s projected now at a current rate of $1.20,” Schnieders said. “Given their historic dividend policy, we think that their dividend could rise up to the level of $1.75 to $2.00 over the next two or three years. And at the current value, this trumps anything you can get in the bond market.”
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