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Home / Business / Warren Buffett's Berkshire Hathaway received only a $ 300 million increase

Warren Buffett's Berkshire Hathaway received only a $ 300 million increase



The results of the second round of the Federal Reserve's annual comprehensive capital analysis and review (CCAR) were just released and the results showed that most banks passed. It is ̵

1; under a serious negative economic scenario that consisted of, among other things, a 6 percentage point increase in the unemployment rate, a 50% decline in equities, a 25% decline in home values ​​and setbacks in several international economies – our largest banks will remain sufficiently capitalized.

<p class = "canvas-atom canvas text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "This is good news for Berkshire Hathaway [19659002] (NYSE: BRK-A) (NYSE: BRK-B) when much of the $ 205 billion of the equity portfolio is made up of the bank stocks that were subjected to the stress tests. "This is good news for Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) as a major part of its $ 205 billion equity portfolio consists of bank deposits that were subject to the stress tests.

In particular, all the major banks Berkshire Hathaway in the portfolio have no objections to their Fed plans. This clarifies the way the dividend increases and shares the buybacks, and the banks did not disappoint.

Warren Buffett smiles.

Image Source: The Motley Fool.

How stress tests affect Berkshire Hathaway

Of the 18 banks exposed to this year's stress tests, seven are in the Berkshire portfolio. Here is an overview of how much each increased the dividend and what it means for Berkshire's dividend income stream.

Company

Number of shares

Dividend increase per share (quarterly)

Increase in Berkshire's income

] Bank of America (NYSE: BAC)

896,167,600

$ 0.03

$ 26.89 million

Wells Fargo (NYSE: WFC)

409,803,773

$ 0.06

$ 24.59 million

Goldman Sachs (NYSE: GS

18,353,635

$ 0.40

$ 7.34 million

US Bancorp (NYSE: JPM)

129,308,831

$ 0.05

$ 6.47 million

JPMorgan Chase (NYSE: JPM)

59,514,932

$ 0.10

$ 5.95 million

] PNC Financial (NYSE: PNC)

8,671,054 [$19659021] $ 0.20

Bank of New York Mellon (NYSE: BK)

80.937.250

$ 0.03

] $ 2.43 million [19659023] Total

$ 75.4 million (quarterly), $ 301.6 million (annually )

Data source: Company press releases, Berkshire Hathaway SEC archive, 2019), and author's own calculations. Numbers cannot be perfect due to rounding.

So, Berkshire is going to get more than $ 300 million in extra dividend income per year due to the positive stress test results.

Warren Buffett is probably more excited about this part [19659060] In addition to the dividend announced, most banks involved in the stress tests also increased their share purchase plans. And several of Berkshire's bank deposits showed some pretty impressive figures:

  • Bank of America approved $ 30 billion in repurchase for 12 months from July 2019 to June 2020, an increase of $ 10 billion from last year.
  • JPMorgan Chase authorized a $ 29.4 billion buy-back plan, an increase of $ 8.7 billion.
  • Wells Fargo announced up to $ 23.1 billion in buybacks. This is actually a small decline from the $ 24.5 billion approved last year.
  • Goldman Sachs increased its repurchase authorization to $ 7 billion this year from $ 5 billion a year ago.
  • PNC Financial approved $ 4.3 billion in repurchase, more than double the $ 2 billion approved last year.
  • US Bancorp will buy back as much as $ 3.0 billion over the coming year, the same as last year's
  • Bank of New York Mellon increases its repurchase authorization by 20% to $ 3.94 billion.

<p class = "canvas-atom canvas text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Buffett has added bank deposits to the Berkshire portfolio at an aggressive pace in recent quarters, indicating that he sees a lot of value in the industry, since Buffett loves buybacks when a stock trades for less than its intrinsic value, Oracle of Omaha may be even more excited about banks' stocks Buy-backs than their dividends are increasing. Data-Reaction = "42"> Buffett has added bank deposits to the Berkshire portfolio at an aggressive pace in recent quarters, suggesting he sees great value in the industry. Since Buffett loves repurchases when a stock trades for less than its intrinsic value, it is possible that Omaha Oracle may be even more excited about its repurchases in bank shares than their dividends increase.

Bottom line is that Berkshire gets a double dose of good news the dividend increases by about $ 300 million, which can then be used against further share purchases or acquisitions. And those companies that Buffett generally consider to be undervalued are planning to buy back shares at an aggressive pace. In short, it's a good day to be a bank investor.

<p class = "canvas-atom canvas text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " More from The Motley Fool "data-reactid =" 44 "> More from The Motley Fool

<p class =" canvas (19 shares) – Matthew Frankel, CFP owns shares in Bank of America and Berkshire Hathaway (B shares) The Motley Fool owns and recommends Berkshire Hathaway (B shares). Motley Fool has a disclosure policy . "data-response time =" 52 "> Matthew Frankel, CFP owns shares in Bank of America and Berkshire Hathaway (B shares). The Motley Fool owns shares and recommends Berkshire Hathaway (B shares). Motley Fool has an information policy.


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