Monday, February 23, 2009

JP Morgan dividend drops my jaw

When JP Morgan's 87% dividend cut popped up on the screen just after the market close it was a stunner. Bad news? Regulatory attack? One of the last good ones drops a bomb? NO! A quick read through their press release, while not completely reassuring, put those dire first fears to rest. This appears to be a cautionary measure given this unprecedented and almost completely unpredictable environment. In a follow up conference call the company endorsed the general range of current analyst expectations for the quarter based on current visibility and said that trading and investment banking activities were performing well but would be somewhat offset by further reserves for consumer credit losses, especially in the credit card area. These business comments are consistent with market observations.

CEO Dimon is an astute observer of the capital markets and he is, observed from afar, both demanding and decisive. Many CEO's would be afraid that such a move would be a market disaster, signaling a crisis. In a company with JPM's recent track record it is not. It is a sign of having the confidence to make a bold move that is also the correct move.

If God gives us a stable market day tomorrow, the stock price will GO UP. If not, JPM will not be as ugly as others.


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