Here's How U.S. Bancorp Can Afford to Pay You a 5.7% Dividend
Given the sell-off in the sector this year, a number of super-regional banks have suddenly seen their dividend yields shoot up.
One of those is U.S. Bancorp (NYSE: USB), which now has an annual dividend yield of 5.7%. When dividends rise suddenly, they can often be a warning sign that something might be wrong with the company, but here's how U.S. Bancorp can afford to pay this large dividend.
Banks have to hold regulatory capital so they can absorb unexpected loan losses and continue to lend during a severe economic downturn. One key regulatory capital ratio is the common equity tier 1 capital ratio, which looks at a bank's core capital expressed as a percentage of its risk-weighted assets (RWA), such as loans.
Source Fool.com