Why JPMorgan Chase Stock Jumped 10% in July

What happened

Shares of JPMorgan Chase (NYSE: JPM) leapt 10.3% last month, according to data provided by S&P Global Market Intelligence, after the largest U.S. bank by assets delivered better-than-expected second-quarter earnings and boosted its dividend.

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So what

JPMorgan headed into July with some momentum following the approval of its capital-return plan by the Federal Reserve. The bank is increasing its dividend by 43%, to $0.80 per quarter, and it intends to repurchase as much as $20.7 billion of its stock in the year ahead.

“The quality of the company’s capital, liquidity and control environment positions the firm well for varying economic scenarios while maintaining the ability to sustainably deliver value to our customers and investors,” CEO Jamie Dimon said in a press release.

The stock’s gains accelerated after JP Morgan’s strong second-quarter results, which saw revenue rise 6%, to $28.4 billion, and earnings per share surge 26%, to $2.29. That bested Wall Street’s expectations for earnings per share (EPS) of $2.22.

Now what

With tax cuts and deregulation helping to accelerate economic growth, JPMorgan should continue to benefit from the overall expansion of the U.S. economy. Moreover, rising interest rates could help to improve the bank’s net interest margin, thereby boosting profits. Better still, with its strong earnings growth and relatively low payout ratio of about 30%, JPMorgan Chase should be able to reward investors with more dividend increases and stock buybacks in the coming years.

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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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