On Tuesday, Comerica Incorporated (CMA) enhanced its quarterly common stock dividend by 13% to 17 cents per share. The dividend will be paid on Apr 1, 2013 to shareholders of record as of Mar 15, 2013.
This reflects the company’s commitment to return value to shareholders with its strong cash generation capabilities. Prior to this, the company increased its dividend by 50% (from 10 cents to 15 cents per share) in Apr 2012.
The dividend increase is part of Comerica’s 2012 Capital Plan. The company’s capital plan including dividend increase and other capital actions were submitted to the Federal Reserve in Jan 2012. The Fed did not object to its capital plan and therefore, the company increased its quarterly dividend.
In 2012, the company repurchased 10.1 million shares and combined with dividend payments, returned 79% of full-year 2012 net income to shareholders. Cash and due from banks exiting the year were $1.4 billion.
Going forward, we believe that continuous geographic diversification beyond the company’s traditional and slower-growing Midwest markets could drive growth over the next cycle. Revenue synergies from the Sterling acquisition should accelerate its top-line growth. Capital deployment efforts also inspire investors’ confidence in the stock.
We believe that the company’s current capital position allows sufficient scope for further capital deployment. Yet, its significant exposure to riskier areas such as commercial real estate markets, unsettled economic environment and regulatory issues are looming concerns.
Comerica currently carries a Zacks Rank #3 (Hold). We believe the announcement of a dividend increase will augur well for the company and help boost shareholders’ confidence, which might lead to positive estimate revisions. This, in turn, could cause an upgrade in the Zacks Rank.
Among other companies in the same sector, BB&T Corporation (BBT), Wells Fargo & Company (WFC) and BlackRock, Inc. (BLK) recently increased their capital deploying efforts through dividend hikes.
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