After the financial crisis of 2008, the profitability of major banks around the world took a significant hit – forcing them to significantly reduce (and in some cases stop) dividend payments while also discontinuing their share repurchase program. However, as banks adjusted their business model to respond better to changed market conditions and stricter regulatory requirements, most of them began to grow their profits steadily and began returning cash to their investors. While the European banks have been slower off the starting block compared to their U.S.-based peers in this regard, the two Swiss banking giants UBS (NYSE: UBS) and Credit Suisse (NYSE: CS) have done fairly well over recent years.
Trefis analyzes how dividend payouts as well as share repurchases have trended for UBS vs. Credit Suisse since 2007, and finds that UBS has done a much better job of returning cash to investors over the years.
What is the payout ratio and why it is important?
- Companies return money to shareholders in two primary ways: a) dividends b) share repurchases (buybacks).
- The payout ratio shows the proportion of earnings paid out as dividends to shareholders, typically expressed as a percentage of the company’s earnings while the adjusted…