Warren Buffett's cash hoard will pile up $120 million faster each year and Jamie Dimon will get a $1.85 million raise now that JPMorgan Chase & Co., Wells Fargo & Co., American Express Co. and U.S. Bancorp are boosting payouts.
Buffett's Berkshire Hathaway Inc. is one of the biggest holders of Wells Fargo, which increased its dividend 20 percent, as well as AmEx with a 15 percent jump and U.S. Bancorp, which announced an 18 percent rise. The second-richest American has said he personally owns shares of JPMorgan, whose dividend rose 27 percent. Dimon is the bank's chief executive officer and owns 5.78 million shares.
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The bonanza was made possible by this week's Federal Reserve announcement that 16 of the 18 biggest U.S. lenders had passed the central bank's annual review of their financial strength. Investors have clamored for restoration of cuts made to stave off collapse of the financial system during the 2008 credit crisis, and banks needed the Fed's blessing before adding to dividends or stock buybacks.
"We like increased dividends, and we love repurchases at appropriate prices," Buffett wrote in his annual letter to shareholders March 1, describing the capital plans of some of his company's largest holdings, including Wells Fargo and American Express. "We applaud their actions and hope they continue on their present paths."
Berkshire is the largest holder of San Francisco-based Wells Fargo, the No. 1 U.S. home lender, with 456.2 million shares, according to the Omaha, Nebraska-based company's annual report. For Berkshire, the increase to 30 cents from 25 cents in the lender's quarterly dividend adds up to $91.2 million a year.
AmEx, the New York-based credit-card issuer, raised its dividend to 23 cents from 20 cents, giving Berkshire an extra $18 million from its 151.6 million shares. U.S. Bancorp's new payout would add $10.9 million based on Berkshire's 78 million- share stake. The nation's largest regional lender, based in Minneapolis, will ask its board to raise its quarterly dividend to 23 cents from 19.5 cents.
The increased dividends affirm Buffett's strategy to prepare Berkshire for his eventual departure by amassing investments that will compound in value over time, said Bill Smead, who oversees about $350 million including Berkshire, Wells Fargo and JPMorgan shares in separate accounts and as portfolio manager of the Smead Value Fund.
"Everything he's doing now is setting up a very long- duration stock ownership and company ownership," Smead said in a phone interview.
Buffett, 82, is Berkshire's largest shareholder and chief executive officer. The billionaire has transformed the company from a textile maker into a $255 billion business during the last five decades through takeovers and stock picks. Berkshire had about $47 billion in cash at the end of December.
Dimon, 57, benefits as his New York-based company's quarterly dividend increases to 38 cents from 30 cents on the 5.78 million JPMorgan shares he and his wife own, according to his latest regulatory filing. His holdings would produce about $8.79 million in annual income, on top of his $11.5 million compensation package, which included a $1.5 million salary.
Buffett and Dimon didn't respond to requests for comment e- mailed to their firms.
Regulators have pressed firms since the 2008 credit crisis to give executives more stock and less cash to align their interests with those of shareholders. The banks are required to pass stress tests run by the Fed and submit capital plans that include any changes in dividends or stock-buyback programs.
Dimon's reputation has been wounded by the so-called London Whale episode last year, in which a massive wrong-way bet on derivatives by a U.K. trader led to a record $6.2 billion trading loss. Dimon's compensation package was cut in half by the board, which held him partly responsible.
Senate hearings yesterday in Washington accompanied a report that said Dimon misled investors and dodged regulators as losses escalated on a "monstrous" derivatives bet. The bank "mischaracterized high-risk trading as hedging," and withheld key information from its primary regulator, sometimes at Dimon's behest, investigators found.
The bank has "repeatedly acknowledged mistakes" in handling the loss, Mark Kornblau, a spokesman for the bank, said via e-mail.