Will JPMorgan's (JPM) Special Dividend Plan Help The Stock?

JPMorgan Chase & Co.’s (NYSE:JPM) CEO Jamie Dimon announced that since the company’s shares have been gaining so much, it is planning to use the excess capital to pay a special dividend to its shareholders rather than using it to repurchase more shares.

Notably, shares of the company have gained around 26.8% year to date compared to the Zacks categorized Major Regional Banks industry’s gain of 16.5%. Moreover, since the presidential election on Nov 8, 2016, the stock has gained about 19.5%.

At the conference, Dimon confessed that he was surprised to see the market’s reaction to the election results and was not prepared for the same.

Dimon is of the opinion that as long as the stock is not trading lower than its intrinsic value, it would be feasible and beneficial for the company to pay out the excess capital in the form of a special dividend rather than buying back more shares from existing shareholders.

A special dividend is likely to further boost investor’s confidence in the stock. It might also help the stock to attract fresh investors.

Moreover, according to a data by Bloomberg, the payment of a special dividend will increase JPMorgan’s payout ratio to around 84% from the present figure of 82%.

Further, Dimon also mentioned that the company’s market revenue in fourth-quarter 2016 is expected to be more than 15%, which is higher than the year-ago figure.

Other banks like Citigroup Inc. (NYSE:C) and Bank of America Corp. (NYSE:C) , however, are expected to choose buybacks over special dividends as a way to return excess capital, with Citigroup already making the move towards this direction.

Currently, JPMorgan carries a Zacks Rank #3 (Hold).

A better-ranked stock in the finance space is Carolina Financial Corp. (NYSE:C) . It has witnessed upward estimate revision of 12.9% for the current year over the past 60 days. Its share price is also up 55.9% year to date. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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