JP Morgan Chase 2008 Annual Report Download - page 87

JPMorgan Chase & Co./ 2008 Annual Report 85
of $1.0 billion and is also required to notify the Securities and
Exchange Commission (“SEC”) in the event that tentative net capital is
less than $5.0 billion in accordance with the market and credit risk
standards of Appendix E of the Net Capital Rule.As of December 31,
2008, JPMorgan Securities had tentative net capital in excess of the
minimum and the notification requirements. On October 1, 2008, J.P.
Morgan Securities Inc. merged with and into Bear, Stearns & Co. Inc.,
and the surviving entity changed its name to J.P. Morgan Securities Inc.
J.P. Morgan Clearing Corp., a subsidiary of JPMorgan Securities provides
clearing and settlement services. At December 31, 2008, J.P. Morgan
Clearing Corp.’s net capital, as defined by the Net Capital Rule, of $4.7
billion exceeded the minimum requirement by $3.3 billion.
Dividends
On February 23, 2009, the Board of Directors reduced the Firm's quar-
terly common stock dividend from $0.38 to $0.05 per share, effective
for the dividend payable April 30, 2009, to shareholders of record on
April 6, 2009. JPMorgan Chase declared quarterly cash dividends on
its common stock in the amount of $0.38 for each quarter of 2008
and the second, third and fourth quarters of 2007, and $0.34 per
share for the first quarter of 2007 and for each quarter of 2006.
The Firm’s common stock dividend policy reflects JPMorgan Chase’s
earnings outlook, desired dividend payout ratios, need to maintain an
adequate capital level and alternative investment opportunities. The
Firm’s ability to pay dividends is subject to restrictions. For information
regarding such restrictions, see page 84 and Note 24 and Note 29 on
pages 205–206 and 211, respectively, of this Annual Report and for
additional information regarding the reduction of the dividend, see
page 44.
The following table shows the common dividend payout ratio based
upon reported net income.
Common dividend payout ratio
Year ended December 31, 2008 2007 2006
Common dividend payout ratio 114% 34% 34%
Issuance
The Firm issued $6.0 billion and $1.8 billion of noncumulative per-
petual preferred stock on April 23, 2008, and August 21, 2008,
respectively. Pursuant to the Capital Purchase Program, on October
28, 2008, the Firm issued to the U.S. Treasury $25.0 billion of cumu-
lative preferred stock and a warrant to purchase up to 88,401,697
shares of the Firm’s common stock. For additional information
regarding preferred stock, see Note 24 on pages 205–206 of this
Annual Report.
On September 30, 2008, the Firm issued $11.5 billion, or 284 million
shares, of common stock at $40.50 per share. For additional infor-
mation regarding common stock, see Note 25 on pages 206–207 of
this Annual Report.
Stock repurchases
During the year ended December 31, 2008, the Firm did not repur-
chase any shares of its common stock. During 2007, under the
respective stock repurchase programs then in effect, the Firm repur-
chased 168 million shares for $8.2 billion at an average price per
share of $48.60.
The Board of Directors approved in April 2007, a stock repurchase
program that authorizes the repurchase of up to $10.0 billion of the
Firm’s common shares, which superseded an $8.0 billion stock repur-
chase program approved in 2006. The $10.0 billion authorization
includes shares to be repurchased to offset issuances under the
Firm’s employee stock-based plans. The actual number of shares that
may be repurchased is subject to various factors, including market
conditions; legal considerations affecting the amount and timing of
repurchase activity; the Firm’s capital position (taking into account
goodwill and intangibles); internal capital generation; and alternative
potential investment opportunities. The repurchase program does not
include specific price targets or timetables; may be executed through
open market purchases or privately negotiated transactions, or utiliz-
ing Rule 10b5-1 programs; and may be suspended at any time. A
Rule 10b5-1 repurchase plan allows the Firm to repurchase shares
during periods when it would not otherwise be repurchasing com-
mon stock – for example, during internal trading “black-out peri-
ods.” All purchases under a Rule 10b5-1 plan must be made accord-
ing to a predefined plan that is established when the Firm is not
aware of material nonpublic information.
As of December 31, 2008, $6.2 billion of authorized repurchase
capacity remained under the current stock repurchase program.
For a discussion of restrictions on stock repurchases, see Capital
Purchase Program on page 84 and Note 24 on pages 205–206 of
this Annual Report.
For additional information regarding repurchases of the Firm’s equity
securities, see Part II, Item 5, Market for registrant’s common equity,
related stockholder matters and issuer purchases of equity securities,
on page 17 of JPMorgan Chase’s 2008 Form 10-K.