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Fifth Third (FITB) Announces 9% Dividend Hike: Worth a Look?

Zacks Equity Research

Fifth Third Bancorp FITB has raised its quarterly common stock dividend by about 9% to 24 cents per share. The dividend will be paid on Jul 15, to shareholders of record as of Jun 28, 2019.

Fifth Third’s robust business model reflects the company’s commitment toward returning value to shareholders with its strong cash-generation capabilities. Prior to this revision, the company had raised its quarterly dividend to 22 cents per share in December 2018, marking a 22% hike.

In 2018, Fifth Third submitted a capital plan to the Federal Reserve Board, seeking approval for dividend hike and common stock repurchases. This move followed the Fed’s approval of dividend hike and stock buyback after the completion of stress tests to assess banks’ financial position.

Considering last day’s closing price of $27.88 per share, the dividend yield is currently valued at 3.44%. Additionally, the company has approved a new share-repurchase program of 100 million shares, replacing the existing authorization of 2018 which had around 22 million shares remaining.

Investors interested in this Zacks Rank #3 (Hold) stock can have a look at the bank’s fundamentals and growth prospects. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Revenue Growth: Fifth Third continues to make steady progress toward bolstering its revenues. The company has expanded its non-interest income base, which now represents more than 34% of total revenues, and expects fee income to be up in the near term. Also, it is focused on strategic investments through North Star initiatives, which will likely result in revenue growth, expense savings and operational excellence.

The company’s projected sales growth (F1/F0) of 10.73% indicates constant upward momentum in revenues.

Earnings Per Share Strength: This banking giant has witnessed earnings growth of 9.2% in the last three-five years. Additionally, the company’s long-term (three-five years) estimated EPS growth rate of 7.17% promises rewards for investors over the long run. Good news is that the company pulled off an average positive earnings surprise of 5.47% over the trailing four quarters.

Stock Looks Undervalued: Fifth Third seems undervalued as compared with the industry. Its price-to-book and price-to-earnings ratios are below the respective industry averages.

Share Price Movement: Fifth Third’s shares have gained around 18.5%, year to date, compared with 10.5% growth recorded by the industry.


 

Some other finance stocks which raised their dividends during the current quarter include Lazard Ltd. LAZ, Main Street Capital Corporation MAIN and First Midwest Bancorp FMBI.  Lazard raised its quarterly dividend by 7%, while First Midwest Bancorp increased by 17%. Also, Main Street Capital has announced a 2.5% rise in its common stock dividend.

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Fifth Third Bancorp (FITB) : Free Stock Analysis Report
 
First Midwest Bancorp, Inc. (FMBI) : Free Stock Analysis Report
 
Lazard Ltd (LAZ) : Free Stock Analysis Report
 
Main Street Capital Corporation (MAIN) : Free Stock Analysis Report
 
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