Why bank stocks can't stop raising capital

It's almost a Ponzi scheme... bank stocks can't actually afford their dividend payouts.

Summary: Banks are inherently capital intensive businesses that constantly need new equity to grow their lending books. Banks manage the issue by offering dividend reinvestment plans and large capital raisings, which have been sustained by high bank share prices. But if a bank is struggling, the share price will likely be low, resulting in increased dilution at the next capital raising.

Key take-out: A combination of subdued earnings growth, continued share dilution and lower bank share prices is likely to lead to lower dividend per share growth in the future and a reasonable possibility of reduced dividends.

{{content.question}}

{{ twilioFailed ? 'SMS Code Failed to Send…' : 'SMS Code Sent…' }}

Hi {{ user.FirstName }}

Looks like you've already taken a free trial

Please enter your payment details

We have sent you a code via SMS to {{user.DayPhone}}

please enter this code below to activate your membership

We cannot send you a code via SMS to {{user.DayPhone}}

If you didn't receive SMS code please

SMS code cannot be sent due to: {{ twilioStatus }}

Please select one of the options below:

Looks you are already a member. Please enter your password to proceed

Please untick this box when using a public or shared device


Verify your mobile number to unlock a FREE trial

Please sign up for full access

Updating information

Please wait ...

  • Mastercard
  • Visa
Mastercard

The email address you entered is registered with InvestSMART.

Please login or select "Don't know password"

Please untick this box when using a public or shared device


Register as a new member

(using a different email)

Related Articles