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Recently, U.S. Bancorp’s (USB - Free Report) board of directors announced a 23% hike in the company’s quarterly common stock dividend. The revised quarterly dividend comes at 37 cents per share compared with the previous figure of 30 cents. This dividend will be paid on Oct15 to shareholders of record as of Sep 28, 2018.
This dividend hike is in line with the company’s 2018 capital plan, which also includes a share-repurchase program of up to $3 billion for a four-quarter period which began on Jul 1, 2018. Notably, U.S. Bancorp returned 69% of its earnings to shareholders through dividends and share repurchases as of Jun 30, 2018, within the targeted payout ratio of 60-80%.
Since 2011, U.S. Bancorp has been raising its dividend consistently. From paying 12.5 cents a share as quarterly dividend, the company has come a long way in terms of its capital strength. Prior to this hike, the company had raised its dividend by 7.1% (from 28 cents to 30 cents per share) in September 2017.
Considering Tuesday’s closing price of $54.15 per share, the dividend yield is currently valued at 2.2%.
The business model of U.S. Bancorp is quite impressive as it enables the company to generate sufficient capital, strengthen its balance sheet and help return capital to shareholders. Moreover, we believe strategic acquisitions will expand the company’s business and enhance its profitability over time.
The company’s strong capital position and expanded business through acquisitions, along with steady organic growth, aided by rising loans and deposits, and improved credit quality, will support its profit figures. However, escalating costs might limit its growth to some extent.
During the six-month period ended Jun 30, 2018, the company paid roughly $996 million in dividends to the common shareholders. Additionally, it repurchased common stock worth about $1.3 billion during the period. Cash and due from banks, exiting the quarter, were about $19 billion.
U.S. Bancorp currently carries a Zacks Rank #2 (Buy). The company’s shares have gained 5.6% in the past three months compared with 1.6% growth recorded by the industry.
Other Stocks to Consider
Comerica Incorporated (CMA - Free Report) has been witnessing upward estimate revisions for the past 60 days. Also, the company’s shares have gained nearly 27.4%, in the past year. It carries a Zacks Rank of 2, at present.
M&T Bank Corporation (MTB - Free Report) has been witnessing upward estimate revisions for the past 90 days. Additionally, the stock has jumped around 9.4% over the past year. It currently carries a Zacks Rank #2.
Enterprise Financial Services Corporation (EFSC - Free Report) has been witnessing upward estimate revisions for the past 60 days. Moreover, this Zacks #2 Ranked stock has rallied more than 31% in a year’s time.
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