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Federated Builds Treasury Fund on New Buyback Program - Analyst Blog

Federated Investors, Inc. (FII) recently announced its plan to enhance its treasury fund with a new share repurchase program. The company’s board of directors has authorized the buyback of additional 4 million shares of its class B common stock through open market operations.

The repurchase will build Federated’s treasury fund, which will then be utilized to facilitate employee share-based compensation plans, and prospective mergers and acquisitions.

The latest approval adds to nearly 300,000 shares available under Federated’s existing share repurchase program as of Feb 5, 2015. Both existing and the newly announced buyback programs do not have an associated expiration date.

Federated’s strong capital and liquidity positions lend support to its steady capital deployment measures. Notably, in 2014, the company repurchased shares worth nearly $27 million and had $297.3 million in cash and other investments as of Dec 31, 2014. Also, it paid a quarterly dividend of 25 cents per share on Feb 13.

Federated ranks among the largest investment managers in the country, with assets under management of $362.9 million as of Dec 31, 2014. The company has a growth story that was constructed on strategic acquisitions completed over years. The latest deal in that line was closed in Mar 2014 with RJ Delta Fund Management, a subsidiary of Raymond James Financial, Inc., to acquire its marketing services and thereby, expand Federated’s services in Chile.

We expect such efficient capital deployment activities to boost shareholders’ confidence, making the stock an attractive pick for yield-seeking investors.

Currently, Federated carries a Zacks Rank #3 (Hold). Better-ranked stocks in the investment management space are Signature Group Holdings, Inc. (SGGHU) and Woori Bank Co., Ltd. (WF) and Ameriprise Financial, Inc. (AMP). While both Signature and Woori carry a Zacks Rank #1 (Strong Buy), Ameriprise holds a Zacks Rank #2 (Buy).


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