Capital One Financial Corp. (COF), JPMorgan Chase & Co. (JPM), Bank of America Corp (BAC): What This CEO’s Extraordinary Tenure Tells You About His Bank

It’s difficult to gauge exactly how well each acquisition has performed, but it’s relatively easy to determine whether any of them has been a failure.

Companies will attribute anything over the tangible value of an investment they’ve paid for to goodwill on the balance sheet. Generally, if goodwill is written down, it means a company has overpaid for something. And Capital One has had a few writedowns to its goodwill in recent years:

Source: Company earnings reports.

Does this mean Capital One has overpaid for its recent acquisitions? In this case, no: The bank’s two major writedowns in 2007 and 2008 resulted from exiting the mortgage business (which was a part of North Fork) and from some auto-lending business in the midst of the recession. Investors should take heart in knowing that while Capital One has been busy writing checks, it hasn’t been preoccupied with writing down goodwill.

Meaningful dividends
After 13 years of $0.11 annual dividends, Capital One announced that it would begin paying out a yearly $1.50 dividend beginning in February 2008. However, that lasted only five quarters; after the recession hit, the bank reduced its dividend payment to $0.20 annually in March 2009. Yet after it passed the government’s stress tests earlier this year, the bank once again increased its annual dividend, up to $1.20.

Dividends historically haven’t been a major part of Capital One’s capital allocation plans, but that appears to be changing as its business matures. However, investors need to monitor whether Capital One keeps raising that dividend to match any increases in the value of its common stock.

Share buybacks
Fairbank’s comments in the annual report regarding Capital One’s dividend and share buybacks proved prescient. In addition to this year’s dividend increase, Capital One Financial Corp. (NYSE:COF) announced a $1 billion share-buyback plan in July. The bank engaged in its last buyback before the market crashed in 2007 — choosing to focus on acquiring more business. Today, it’s far too early to gauge the success of this current plan. But it does show the company’s renewed, firm commitment to returning value to shareholders in a meaningful way.

In all, investors should see that Capital One is committed to its long-term health and growth. The bank has emerged from the credit crisis with the same innovate spirit that’s always driven it. And with Fairbank at the helm, it’s in a good position to stay on top of its rivals for years to come — to the benefit of its shareholders.

The article What This CEO’s Extraordinary Tenure Tells You About His Bank originally appeared on Fool.com and is written by Patrick Morris.

Patrick Morris owns shares of Bank of America. The Motley Fool recommends Bank of America and Goldman Sachs and owns shares of Bank of America and JPMorgan Chase.

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