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The bank operates in three primary lines of business. Its community banking division includes consumer and small business checking and savings, credit cards, mortgages, student loans and small business lending. The wholesale banking segment covers business banking, commercial real estate, corporate lending and treasury management. The wealth and investment management group includes wealth and retirement planning, trust services, private banking, brokerage and mutual funds.
The stock pays a dividend yield of roughly 2.4% and has seen its quarterly dividend raised consistently since 2012.
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According to 2017 Q4 results, Wells Fargo generated $22.18 billion of net income in 2017, an improvement of just around 1% over the year prior. The community banking division accounted for 54% of that number, with wholesale banking responsible for 39%.
While Wells Fargo is still considered one of the “big four” banks along with JPMorgan Chase (JPM ), Citigroup (C ) and Bank of America (BAC ), but it’s been struggling over the past 12 months compared to its peers. JPM and BAC both posted annual revenue gains of more than 4%, compared to Wells Fargo’s improvement of less than 1%. Efficiency ratios of WFC such as return on equity and return on assets dipped strongly in the third quarter before rebounding in Q4. Part of the decline may be due to one-time legal charges related to the account opening scandal, but it’s worth noting that total loan balances, one of the big money makers for the bank, has been steadily declining.
Wells Fargo’s stock price is up 8% thus far in 2018 and currently sits at all-time high levels. The stock trades at 14 times 2018 earnings estimates, much lower than the 19 multiple of the broader S&P 500. That P/E ratio is comparable to those of its big bank peers.
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Wells Fargo pays an annualized dividend of $1.56 per share. Like many financial companies during the financial crisis, the company slashed its dividend in 2009, cutting it by 85%. Since 2011, Wells has recommitted to its dividend by raising it from $0.05 quarterly up to its current level of $0.39. Despite the rapid growth, the stock’s payout ratio remains well below 40%, a very sustainable level for a cash cow, such as WFC.
In 2017, Wells Fargo returned $14.5 billion to shareholders through a combination of common stock dividends and net share repurchases, up 16% from 2016.
You can find an updated list of companies that recently announced changes in their payout policies, along with their ex-dividend dates, in our Dividend Payout Changes and Announcements tool.
Despite current competitive pressures, Wells Fargo remains a leader in the financial services sector and, as such, enjoys several advantages in the industry.
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With weaker-than-average loan and revenue growth recently, Wells Fargo is focused on a few areas to help drive future growth.
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Wells Fargo had a challenging year in 2017, and needs to manage a number of headwinds going forward.
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Wells Fargo remains in a strong financial position overall, but it’s had its share of struggles lately. It’s tough to say how much the fake account scandal has impacted its financials, but the bank has definitely been underperforming its peers. The dividend yield appears to be in good shape, but keep an eye on loan growth and margins to indicate whether Wells is turning things around.