Friday, April 13, 2007
US Bank (USB), the big Minneapolis based bank, has a continuing pledge, which they reiterate periodically, to return to their shareholders 80% of their earnings in either dividend increases or share buybacks. I know of no other company that has this specific a pledge. REITs, of course, by law must pay out 90% of their earnings, but USB is unique, as far as I know, in communicating a commitment to shareholders that even my elderly mother sitting in a small town in Indiana can understand. Pledges like USB's were common place in the early days of stock trading in the US when early traders on Wall Street gathered under the buttonwood tree. They had none of today's ever lengthening list of rules and regulations. Yet, somehow they made deals and bought and sold securities based on the "word" of the men who ran corporations in those days. Those were the days of "a man's word is his bond." Today things have changed. Now its "A man's bond is his contract, unless he or she can find the loop holes." I personally believe that salt-of-the-earth Americans are near a tipping point in their level of trust for corporate America and Wall Street. The images of both have been sullied by the incessant news of broken promises and broken laws by the people we have hired to run "our" companies. In company after company "fast and loose" is not a bad word; it is a way of life. The attitude seems to be: "D__n the shareholders. "Whose company do they think this is, anyway?" US Bank with their Midwestern mindset must be hearing the same things we are, and they are responding the way plain talking Minnesotans and Hoosiers do, by eliminating as much "maybe" from their conversation with their shareholders as possible. I think USB's 80% pledge will catch on with other companies trying to distance themselves from the bad actors. USB is a AA rated company that is currently yielding 4.7%, and over the last 5 years, they have raised their dividend by an average of 15% per year. We have been buying USB in our Income Builder style of management.