First Horizon National Corporation (FHN) substantially enhanced its quarterly common stock dividend by 400% to 5 cents per share. The dividend will be paid on Apr 1, 2013 to shareholders of record as of Mar 15, 2013.
Moreover, the company increased its share buyback program by $100 million to $300 million and extended it through Jan 2014. Notably, the program was initiated in Oct 2011.
As of Dec 2012, First Horizon had purchased common stock worth $175 million including $131 million in 2012. Including the new addition, the company has $125 million left under its share repurchase authorization.
This capital deployment activity reflects the company’s commitment to return value to the shareholders with strong cash generation capabilities. The company’s decision to hike dividend and extend its share repurchase authorization depicts its strong capital position and increases the possibilities of clearing the recent stress test.
First Horizon reported fourth-quarter earnings per share of 17 cents on Jan 18, 2013. This was in line with the Zacks Consensus Estimate and well ahead of the prior-quarter earnings of 10 cents a share. The results were driven by considerably improved credit trends. However, the pressure on revenue growth continued. Rising expenses were also a headwind.
First Horizon’s reduced exposure to problem loans is impressive. The company is also aiming at controlling costs and improving long-term profitability by focusing on strengthening its core Tennessee banking franchise. However, the shrinking revenue base and regulatory issues, tepid economic recovery along with a low interest rate environment serve as headwinds.
First Horizon currently carries a Zacks Rank #2 (Buy). Among other companies in the same sector, BB&T Corporation (BBT), Comerica Incorporated (CMA) and Wells Fargo & Company (WFC) also increased dividend recently.
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