Wells Fargo divident cut ahead?

Wells Fargo will have to cut dividend

Excerpt:

Wells Fargo will have to cut its dividend soon to rebuild capital, Friedman, Billings, Ramsay analyst Paul Miller wrote in a note to investors Tuesday. Including recently acquired Wachovia, Wells Fargo's tangible common equity represents 3.6% of tangible assets, while other measures of capital strength likely lagged those of rivals at the end of 2008, Miller estimated. Meanwhile, the bank pays out $5.65 billion in dividends each year and it probably won't earn that much in 2009, the analyst added. "Wells Fargo will have to cut its dividend (if not this quarter, then sometime in 1H09)," he wrote. "The current dividend reduces tangible common equity $5.65 billion annually, and Wells Fargo needs to rebuild its capital ratios." Wells shares fell 13% to $16.27 during afternoon action.

Comment: Better to cut the dividend and be stable in long run!