Fifth Third Bancorp FITB has raised its quarterly common stock dividend by 12.5% to 27 cents per share. The dividend will be paid on Apr 14, to shareholders of record as of Mar 31, 2020.
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 24 cents per share in June 2019, marking a 9% hike.
Considering last day’s closing price of $28.31 per share, the dividend yield is currently valued at 3.81%. Also, the company has a share-buyback program of up to 100 million shares, announced last June, with no expiration date.
Fifth Third’s shares have gained around 11.4%, in the last six months, compared with 21.2% growth registered by the industry.
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 42% 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 and MB Financial’s buyout, which will likely result in revenue growth, expense savings and operational excellence.
Earnings Per Share Strength: This banking giant has witnessed earnings growth of 13.6% 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 2.56% 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.
Strong Leverage: Fifth Third’s debt/equity ratio is valued at 0.77 compared with the industry average of 0.86, indicating a relatively lower debt burden. It highlights the company’s financial stability even amid adverse economic conditions.
Higher Expenses: Elevated non-interest expenses, despite efficiency initiatives, remain a major concern for Fifth Third. Initiatives, such as branch digitization, keep the company’s expense base under pressure for the short term. Given its ongoing strategic investments in several areas, including technology, expenses might escalate in the near term. Notably, expenses witnessed a five-year CAGR of 6.3% in 2019.
Some other finance stocks which raised their dividends during the current quarter include Bank OZK OZK, First Horizon National Corp. FHN and Wintrust Financial Corporation WTFC. Bank OZK raised its quarterly dividend by 4%, while Wintrust Financial increased by 12%. Also, First Horizon has announced a 7% hike in its common stock dividend.
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