The board of directors of Discover Financial Services DFS recently gave its nod for the new capital plan to be implemented over the next four quarters. The capital plan includes a 7% hike in the quarterly dividend and $2.5 billion share repurchase program.
This approval comes on the heels of the permission the company received from the Federal Reserve in June to proceed with its new capital deployment plan.
The recent 7% increase in dividend translates to a new quarterly payout of 30 cents per share, up from 28 cents paid in the second quarter. Based on the closing price of $57.42 as on Jul 15, 2016, the annualized dividend of $1.20 per share presently yields 2.1%. Shareholders on record as of Aug 4 are expected to have the meatier dividend in their pockets on Aug 18, 2016.
Discover Financial increases its dividend payout each year. In fact, the latest hike marks the fifth straight year of dividend increases. This Zacks Rank #3 (Hold) consumer loans provider has been raising dividends at a five-year CAGR of 38%.
With respect to share buybacks, the company is authorized to repurchase shares worth $2.5 billion through Oct 31, 2017. This five-quarter share buyback program will replace the previous authorization of $2.2 billion. Discover has already spent $422 million to buy back 9 million shares in the first quarter of 2016.
The company’s continuous focus on boosting shareholders’ value makes it an attractive pick for yield-seeking investors.
Discover Financial’s capital boosting activities include several equity and debt offerings. Such efforts have been strengthening the company’s capital base. The company’s financial health, in turn, facilitates efficient deployment via acquisitions, share repurchases and dividend payouts.
Discover Financial is set to release second-quarter 2016 earnings on Jul 19. The Zacks Consensus Estimate is currently pegged at $1.42 for the second quarter, which reflects a year-over-year decline of 6.9%. Also, our proven model does not show that the company will beat on earnings this quarter. Though the company carries a favorable Zacks Rank #3 (Hold), an Earnings ESP of -0.70% makes surprise prediction difficult.
Stocks to Consider
Some better-ranked players from the broader finance sector include First Midwest Bancorp Inc. FMBI, Monroe Capital Corporation MRCC and Royal Bank of Canada RY. All three stocks sport Zacks Rank #1 (Strong Buy).
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FIRST MIDWST BK (FMBI): Free Stock Analysis Report
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