Bank Dividends are Rising, so Which is Better: JPMorgan or Wells Fargo?

Now that the Federal Reserve has brought the punch bowl back to the party, the healthier banks are looking to boost dividends and increase share buybacks. If you've sat out the financial industry debacle, which stock do you want to accompany to the party?

JPMorgan Chase (JPM) has been an industry standout throughout the crisis, and even scooped the Fed in announcing that it had passed the recent stress test. Compare that with the more unassuming Wells Fargo (WFC).

JPMorgan has a higher payout ratio than Wells, meaning it gives shareholders back more of the money it makes.

JPMorgan Chase Payout Ratio TTM Chart

JPMorgan Chase Payout Ratio TTM Chart by YCharts

JPMorgan’s PE also makes it a cheaper stock than Wells Fargo.

JPMorgan Chase PE Ratio Chart

JPMorgan Chase PE Ratio Chart by YCharts

And before both companies raise their dividends, JPMorgan’s dividend yield was superior to Wells Fargo’s dividend yield.

JPMorgan Chase Dividend Yield Chart

JPMorgan Chase Dividend Yield Chart by YCharts

But sometimes, unassuming can mask an inner strength. Firstly, Wells Fargo plans to hike its dividend by 83% to 22 cents a share per quarter, compared with a mere 20% rise for JPMorgan to 30 cents a share.

Secondly, for investors looking to stocks for income, the steadiness of Wells Fargo's business is more comforting than the sometimes-erratic nature of JPMorgan's exposure to investment banking. Both suffered some wackiness during the recession, but remove that period from the chart below and Wells Fargo demonstrates a continuous, steady rise in net income. Kind of looks like a utility, say PPL Corp. (PPL).

JPMorgan Chase Net Income Chart

JPMorgan Chase Net Income Chart by YCharts

And Wells Fargo has the endorsement of Warren Buffett’s Berkshire Hathaway (BRK.A), which boosted its stake in company last year to 383.7 million shares, which represents 16% of Berkshire’s portfolio.

Lastly, Wells Fargo has just done a better job of managing what it's got. Its return on assets over the past decade is superior to JPMorgan’s. Plus, you might not get a word in edgewise if you brought JPMorgan CEO Jamie Dimon to the party.

Wells Fargo Return on Assets Chart

Wells Fargo Return on Assets Chart by YCharts

Michael McHugh is an editor for the YCharts Pro Investor Service which includes professional stock charts, stock ratings, stock screener and portfolio strategies.

Read more articles about: Company Analysis  

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