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Analyst Blog

BB&T Corporation (BBT - Analyst Report) raised its common share dividend by one cent or 4.3% to 24 cents per share on Tuesday. The dividend will be paid on Jun 2 to shareholders of record as of May 16.

Since the second half of 2004, this Winston-Salem, NC-based financial holding company has regularly paid dividends to shareholders. In fact, this major regional bank continued to pay dividend even amid the financial crisis of 2008.

However, following the crisis, dividend was slashed from 47 cents per share to 15 cents per share. Thereafter, the company started to increase the dividend pay out again. Notably, prior to the latest hike, BB&T had increased its dividend in Jan 2013 by 15% to 23 cents per share.

The latest dividend hike follows the recent review of BB&T’s capital plan, which received no objection from bank regulators. The rise in pay out reflects BB&T’s commitment to enhance shareholder return.

The company’s business model permits it to efficiently generate and deploy capital. Rise in loans and a strong capital position should enable BB&T to maintain its growth momentum. Moreover, prudent expense management, improved credit quality and profitability ratios are the tailwinds. However, the company’s plan to grow inorganically may put pressure on its expense management going forward.

A tepid economic recovery, low interest-rate environment and regulatory pressure are the other challenges.

At present, BB&T carries a Zacks Rank #4 (Sell). We believe that announcement of the dividend hike will boost shareholders’ confidence.

Some better-ranked major regional bank stocks include KeyCorp. (KEY - Analyst Report), The PNC Financial Services Group, Inc. (PNC - Analyst Report) and Wells Fargo & Co. (WFC - Analyst Report). All of these have a Zacks Rank #2 (Buy).