Dividend Payout

Continuing last week’s topic, FHLBanks make money, a lot of it and a steady stream too.  Thus far, they have only done two things with their profits— pay dividends to members or put it in their own savings account­— Retained Earnings.  Today I’ll focus on dividends.

Over time, members have been paid dividends 2.0% to almost 5.0% above the risk-free rate of return— that is an attractive return.  Moreover, as shown in my first blog, the net result of this dividend when combined with low rates on advances, allows members to borrow at the same rate as the US Treasury (or again, if you do the math wrong, well below Treasury, as one Bank likes to show).  That, even with correct math, is very compelling – members of the FHLBanks get a great deal.

Too good a deal?

Perhaps, but perhaps not.  Let the FHLBs and their members decide.  But, I do believe a floor has been established.  Borrow from your FHLB, and get a dividend, but you can’t borrow at an all-in cost below the rate the US Treasury borrows at. 

That is a great deal— the FHLBs and their members can work out the details.

Latest News
Tables & Charts

One Response

Leave a Reply

Your email address will not be published. Required fields are marked *