Is Wells Fargo (WFC) Undervalued After Its Earnings Beat And 11% Dividend Increase?

What Wells Fargo’s recent dividend increase could signal for shareholders

Wells Fargo (WFC) just paired better than expected second quarter earnings with an 11% lift in its quarterly common stock dividend to $0.50 per share, a combination that tends to focus attention on the stock’s income profile.

See our latest analysis for Wells Fargo.

At a share price of $86.45, Wells Fargo’s 90 day share price return of 6.98% sits alongside a 1 year total shareholder return of 13.59% and a 3 year total shareholder return of 106.12%. This points to longer term momentum despite more mixed year to date performance and recent bond issuance activity in late July.

If Wells Fargo’s move has you thinking about where else capital could work hard, it may be worth scanning 18 top founder-led companies

After a strong quarter, a higher dividend and fresh bond issuance, Wells Fargo now trades about 16% below the average analyst price target and at a larger intrinsic discount. So where might fair value realistically sit in that spread?

Most Popular Narrative: 12.1% Undervalued

With Wells Fargo last closing at $86.45 against a narrative fair value of $98.34, the valuation gap rests on a detailed earnings and revenue story.

The removal of the asset cap and resolution of multiple regulatory orders unlocks Wells Fargo's ability to aggressively grow its balance sheet including deposits, loans, and trading assets after years of constraint, likely resulting in higher revenue and earnings growth over the coming quarters and years.

Read the complete narrative.

Want to see what sits behind that balance sheet expansion story? The narrative leans on measured revenue growth, firm margins, and a richer future earnings multiple.

Result: Fair Value of $98.34 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, investors in Wells Fargo still need to weigh ongoing regulatory obligations, as well as the risk that faster moving digital or fintech competitors could chip away at deposits and fee income.

Find out about the key risks to this Wells Fargo narrative.

Next Steps

With both risks and rewards on the table for Wells Fargo, it makes sense to move quickly and test the numbers against your own expectations through the 2 key rewards and 1 important warning sign

Looking for more Wells Fargo style investment ideas?

If Wells Fargo has sharpened your focus on where to put fresh capital, do not stop here. Use targeted stock lists to surface opportunities you might otherwise miss.

• Target potential mispricing by scanning companies that combine quality fundamentals with attractive valuations through the 55 high quality undervalued stocks.
• Strengthen your income stream by reviewing stocks that feature higher yields through the 9 dividend fortresses.
• Prioritise resilience by checking companies that carry lower risk scores using the 81 resilient stocks with low risk scores.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com