SunTrust Banks, Inc.’s (STI - Free Report) board of directors has approved a 25% hike in the quarterly common stock dividend. The revised quarterly dividend is now 50 cents per share, up from the prior payout of 40 cents. This dividend is payable on Sep 17, to shareholders on record as of Aug 31, 2018.
The hike comes as part of the company’s 2018 capital plan which was approved by the Federal Reserve in June. Additionally, SunTrust’s capital plan includes authorization to repurchase $2 billion worth of shares, through the second quarter of 2019.
Since 2013, SunTrust has been raising its dividend annually. Prior to this hike, the company had hiked its dividend by 54% (from 26 cents to 40 cents per share) in August 2017.
Based on the last day’s closing price of $72.45 per share, the dividend yield is 2.76%.
Other than SunTrust, several other major regional banks, including The PNC Financial Services Group, Inc (PNC - Free Report) , KeyCorp (KEY - Free Report) and Northern Trust Corporation (NTRS - Free Report) , have increased their quarterly dividends (as part of their 2018 capital plan) in the range of 20-50%.
We remain optimistic about the company’s potential to continue enhancing shareholder value, driven by its strong cash-generation capabilities.
Given the company’s solid liquidity position, earnings strength and lower debt level, SunTrust will likely retain its improved capital deployments and continue enhancing shareholder value moving ahead.
Let’s dig deeper into SunTrust‘s financial performance and fundamentals to understand the risk and rewards.
SunTrust’s net revenues witnessed compounded annual growth rate (CAGR) of 3.2%, over the last five years (2013-2017). This upside stemmed from strong loan and deposit growth, along with the company’s efforts to enhance revenue growth through several initiatives. The company’s projected sales growth for 2018 is 3.3%.
Further, SunTrust witnessed 10.4% rise in earnings per share over the last three to five years. This trend is expected to continue in the near term as well. The company’s earnings are projected to grow more than 38% in 2018.
Also, SunTrust’s cost-saving measures have borne results and support profitability. Non-interest expenses declined at a six-year CAGR (2012-2017) of 1.7%, with the trend continuing in the first half of 2018. Also, as the company continues with its initiatives of consolidating branches, the overall expense level might remain low.
With these favorable trends, the stock has gained 12.2% compared with the industry’s growth of 0.7% so far this year.
SunTrust currently flaunts a Zacks Rank #1 (Strong Buy). Also, the stock has a Value Score of B. The Value Score condenses all valuation metrics into one actionable score that helps investors steer clear of ‘value traps’ and identify stocks that are truly trading at a discount. Our research shows that stocks with Style Scores of ‘A’ or ‘B’, when combined with a Zacks Rank of 1 or 2 (Buy), offer the best upside potential. You can see the complete list of today’s Zacks #1 Rank stocks here.
With a steady dividend income opportunity, SunTrust stock appears to be a good investment option now based on its strong fundamentals.
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