Stock Price Performance - Sample Essay
The following tables show the five-year profitability trend of Wells Fargo along the Pre-Tax Pre-Provision aspect. It can be determined from the table the series of effective measure and decision made by the Wells Fargo management in terms of the strategic directions it has set for the bank during the last five years. This likewise implies the careful planning Well Fargo undertakes to achieve its corporate goals and objectives.
From Table 1, earnings of Wells Fargo Bank steadily increased strengthened by its profitable retail operations throughout its service areas jumping from US$11. 2 billion five years ago to a current US$20.8 billion pre-tax earnings annualized for the year 2008. These figures indicate a stable stream of revenues to sustain expansion along chosen market positions and the distinct services Wells Fargo Bank is well-known for; keeping the customers satisfied with the bank’s whole array of retail banking services only Wells Fargo can provide. This is the market niche for which the bank has been working hard during the last several decades. From the table below, Wells Fargo’s return on equity is pegged at 17 per cent, which if compared to the five-year trend of 18 percent strongly indicates a stable return on equity over the years.
Growth rate of its capital likewise recorded a modest 5 per cent which is also indicative of the five-year growth period of 6 percent. Because of the huge asset base of Wells Fargo, its recorded return on assets remained stable at 1. 4 per cent. Other profitability indicators show a consistent stable operations as earnings before taxes similarly approximated its five-year average including the aspect of pre-tax profit margin. On the overall, the profitability of Wells Fargo Bank is simply indicative of its stable operations.
Strategies adopted to enhance profitability include a credit-strong retail market, selective lending, strong customer service leading to increased customer patronage, a high volume of non-interest bearing deposits reaching $89 billion creating a vast opportunity for high return investments and strong cash flow. In addition, Wells Fargo’s strong shareholder relationships enable it to preserve its cash cow position being plowed back into operations. Dividend Dividends per share have been restated for the corporation’s two-for-one stock splits originated since 1959 resulting in an almost yearly 2 for 1 stock splits effected in the form of a
100 percent stock dividend, distributed starting October 10, 1997 with subsequent declaration up to August 11, 2006. This history of stock and cash dividend payments steadily increased from a mere $0. 15 cents per share quarterly allocation back in 2003 to a current $0. 34 cents per share, more than double during a five-year period. With a recorded 0. 49 earnings per share already being generated from its operations, Wells Fargo Bank continues to dominate the market with its conservative but profitable operations assured by its excellent systems efficiency configurations.
Primarily due to its strong attractiveness to investors, Wells Fargo Bank is able to take advantage of the opportunities provided by the market even in its volatility and series of meltdowns during the current period. In this regard, Wells Fargo encourages its shareholders to reinvest their cash dividends in anticipation of bigger returns later. The bank provides stability to its investors through regular dividend payouts in the first business day of March, June, September and December. In addition, Table 8 shows a very encouraging dividend payout ratio of 45 per cent during the five year period.
The following latest stock data for Wells Fargo indicates the following characteristics: Figure 1 shows a one year volatile progression of Well Fargo’s stock as provided in the chart for the period January to November 2008. Generally, stock performance during the period is good. Figure 2 illustrates the general optimistic trend of Wells Fargo stock despite being affected by the July 1008 crash which did not spare even the best stock around the world. This shows the stability and strength of Wells Fargo shares.