Is Regions Financial's Dividend at Risk?
The Federal Reserve has currently capped bank dividends to an amount equal to a bank's average net income over the previous four quarters. While this cap is temporary, it could certainly continue into the fourth quarter, especially if economic conditions continue to be volatile. What this means is that a bank's ability to continue paying its current dividend can really be limited by its ability to generate earnings.
In its second quarter, Regions Financial (NYSE: RF), a $144 billion asset bank headquartered in Birmingham, Alabama, reported a net loss of $214 million. If the Fed's current cap continues into the fourth quarter, Regions would have to generate a certain amount of income in the third quarter to maintain its current dividend.
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Source Fool.com
