Wells Fargo's Dividend Yield Nears Decade High for Big Six Bank

(Bloomberg) -- Wells Fargo & Co. is once again flirting with something that no major U.S. bank has done in a decade: have a dividend yield north of 4 percent.

Don’t expect a celebration.

The spike in the yield comes as the result of sliding shares rather than profit growth. Wells Fargo dropped as much as 1 percent in early trading Wednesday after gaining 2.5 percent to start the week. It’s indicated dividend yield now sits at 3.8 percent, slightly below the 3.9 percent it hit at the end of last year.

Morgan Stanley was the last of the big six banks to see its indicated dividend yield above four percent and that only happened in the wake of the global financial crisis. JPMorgan Chase & Co. came closest prior to Wells Fargo. It’s indicated yield rose to 3.87 percent in 2012 during the height of the London Whale controversy.

High dividend yields can present a buying opportunity for investors, but analysts who cover the company have presented a gloomy outlook for the shares.

Wells Fargo’s shares “are likely to remain ‘dead money’,” wrote Buckingham’s James Mitchell in a note. Goldman Sachs Group Inc. analysts cut their outlook for the bank on concerns about how long it will take to replace ex-chief executive officer Tim Sloan and its lowered 2019 net interest income forecast.

For the time being, Wells Fargo’s positive dividend health score -- a proprietary model of profitability, cash flow and leverage metrics -- should reassure investors that there’s no dividend cut on the horizon and the higher yield relative to its peers and history may draw investors back in.

To contact the reporter on this story: Brandon Kochkodin in New York at bkochkodin@bloomberg.net

To contact the editors responsible for this story: Joe Weisenthal at jweisenthal@bloomberg.net, Larry Reibstein

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