Back to top

Analyst Blog

On Monday, People's United Financial Inc. announced that its Board of Directors has approved a new stock repurchase program.

This share buyback program upholds the company’s trend of returning wealth to its shareholders. Under the new share repurchase authorization, 10% of the company’s outstanding common stock – totaling 33.6 million shares – can be repurchased.

The shares will be bought through open market either through agents or directly. However, the time of repurchase as well as the terms and conditions of the program will be at management’s discretion.

Further, the share repurchases will be funded with the proceeds of debt financings and the available cash. Yet, the debt financings and share repurchase actions will be taken based on the market conditions.

Earlier in the current quarter, People's United successfully completed its previous share repurchase program, announced in October 2011. The company bought back 18 million shares at a weighted average price of $12.08 per share since the announcement. Further, for the nine months ending September 30, 2012, People's United paid a total dividend of $164.3 million on its common stock.

Moreover, over the last five years, People's United has returned roughly $1.8 billion to the shareholders through share repurchases and dividends.

The announcement of the new program depicts the company’s strong fundamentals, reflecting healthy capital levels, low risk business model and future growth prospects. Management aims to continue with the ongoing capital deployment activities through consistent share buybacks and dividend payments along with opportunistic acquisitions.

At the same time, this initiative would help the company reduce share count, thereby increasing earnings per share and return on equity. Moreover, it is also expected to boost investors’ confidence in the stock.

Earlier this month, Fifth Third Bancorp has inked a deal to buy back about $125 million of its outstanding common stock. The share repurchase deal reached with Credit Suisse International, a division of Credit Suisse Group , is part of its capital plan that got the Federal Reserve’s nod in August this year and encompasses the repurchase of 100 million shares.

As per the agreement terms, Fifth Third will pay $125 million to Credit Suisse on November 9, 2012 and anticipates to receive a significant number of shares then. However, the final settlement for the actual number of shares that Fifth Third would receive is likely to occur on or before February 7, 2013.

People’s United currently carries a Zacks #3 Rank, which translates into a short-term Hold rating. Further, we believe that capital deployment activities will boost its competitive edge. These factors may ultimately result in upward estimate revisions, thereby leading to an improved Zacks Rank.

Please login to Zacks.com or register to post a comment.