On Tuesday, U.S. Bancorp (USB) enhanced its quarterly common stock dividend by 6.5% to 24.5 cents per share. The dividend will be paid on Jul 15, 2014 to shareholders of record as of Jun 30, 2014.
This marks U.S. Bancorp’s 4th dividend increase since 2011, reflecting its commitment to return value to shareholders with strong cash generation capabilities. Prior to this, the company had increased its dividend by 18% (from 19.5 cents to 23 cents per share) in Apr 2013.
In addition to the common stock dividend, U.S. Bancorp announced quarterly dividends on its Non-Cumulative Perpetual Preferred Stock, Series A, Series B, Series F, Series G and Series H of $884.722, $221.18, $406.25, $375.00 and $321.88 per share, respectively. These dividends will be paid on Jul 15 to shareholders of record as of Jun 30.
The dividend increase is part of U.S. Bancorp’s 2014 Capital Plan. The company’s capital plan, which included dividend hike and other capital actions, was submitted to the Federal Reserve in Jan 2014. Following the approval of the plan, the company increased its quarterly dividend. Previously, the company’s board of directors approved a share repurchase program up to $2.3 billion through Mar 2015.
For U.S. Bancorp, its business model is quite impressive as it allows the company to generate sufficient capital, strengthen its balance sheet and help return capital to shareholders. Moreover, we believe that strategic acquisitions will expand the company’s business and improve its profitability over time.
The company’s diversified revenue stream, strong capital position and expanded business through acquisitions, along with better expense management and improved credit quality, will support its profit figures. Yet, a sluggish economic recovery coupled with regulatory issues might limit its growth to some extent.
In first-quarter 2014, reflecting the company’s capital strength, U.S. Bancorp returned 67% of earnings to shareholders through common stock dividends of $420 million and the stock buyback of $482 million. Cash and due from banks exiting the quarter were $7.4 billion.
U.S. Bancorp currently carries a Zacks Rank #3 (Hold). We believe that the announcement of a dividend increase will augur well for the company and help boost shareholders’ confidence.
Some better-ranked finance stocks include Piper Jaffray Companies (PJC) with a Zacks Rank #1 (Strong Buy), while KeyCorp. (KEY) and JMP Group Inc. (JMP) carry a Zacks Rank #2 (Buy).