Tuesday, March 1, 2016

Watch List: Wells Fargo

Wells Fargo is the owner of a large series of multinational banks. They also offer multitudes of financial services to bring in other income. Their services cover basic banking, loans, retirement, and investment options. As one of the big four banks in the USA, they hold a strong national recognition and they will likely withstand the test of time that many banks topple over when faced with adversity.


Dividend Yield: 3.12%
Annual Payout: $1.50/year (paid quarterly)
Payout Ratio: 34.8%


WFC, like ADM just passed their ex-dividend date. It was on 2/3/2016 so the dividend train has already left the station for the quarter. It's unfortunate but that simply means that the next is only a few shorts months away since it is paid out quarterly.

Dividend Growth:

As one of the big four banks, WFC was also affected by the financial crisis in 2008 when the housing market decided to take a dump (stupid adjustable rates). As such, WFC did cut their dividend payments for a short period of time when that happened even though they had been paying and raising them since 1998. Prior to 1998, the company had also been paying and raising dividends since 1993 before 1998 when they dropped them down to the lower amount.


Currently, WFC is trading at $48.07/share which is 8.02% below the 52 week moving average of $44.50-58.77. The stock is at a discount at this price but this appears largely to be related to the moving downward spiral of the entire banking sector. The more and more that federal rates are discussed, the more bank stocks are affected either upwards or downwards. When the times are good for rates, they're really good. When they bad however, it can be disastrous in the sector.

P/E Ratio and EPS:

At this time, Wells Fargo has a P/E Ratio of 11.66x which is exactly what I want to see it at. It's right at the bottom of the 10-20 area that I would feel safe betting on and the EPS is at 4.12 so the company itself is clearly still profitable. These numbers are very supportive of a good business model at a discount.

Financial Statements:

When I turn to WFC's financial statements, my lips turn into a grin that stretches from ear to ear. Over the last five years, from 2011-2015, they have managed to raise their balance sheet year after year and in addition to that, their income sheet also reflects the same positive momentum. Their cash flow is the only thing that seems a little out of the ordinary but as one of the four big banks, it's not unusual for cash flow to be up and down year by year depending on where it has to best be allocated.

Final Review:

I don't know where to start with Wells Fargo; I simply like the company as a whole. Their business model is air tight, their numbers are all positive and don't show any signs of worry, they've had a past of dividend cuts but they've steadily raised them right back up once the banks return to normality, and the price is at a nice little discount as the rates are still being mauled around. This would appear to be a pretty good time to get into the sector even though it as a whole is a very up and down area. Portfolios need a large mix of different sectors and I currently do not own any bank stocks in the Cookie Jar portfolio so it would only seem fitting to add a little WFC when I get the chance to get my hands on it.


  1. I'm long WFC. It's the only US bank I own. The price was depressed but it looks like it's on the rebound now. You might want to buy shares now before the next lift.

    1. Oh, believe me I know. I have to wait until my budget is in about a week from now. I'm hoping they come down a little bit in that week so I can buy it at the discount that it's currently trading at.

  2. I only like two American banks for my portfolio. WFC and USB. I own WFC and probably not buy into USB as I also own three large Canadian banks, TD, BNS and RY. Bottom line, WFC and USB are both solid long time dividend payers with relative conservative business practices. Thanks for sharing.

    1. Right you are, DivHut. I don't want to say that as one of the big three, WFC is too big to fail but... I feel like it's too big to fail...