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BankUnited, Inc. ( BKU - Analyst Report) jumped on the bandwagon of rewarding shareholders via enhanced capital deployment activities. The company announced an enhancement of nearly 23.5% in its quarterly dividend.
The Board of Directors of BankUnited declared a cash dividend of 21 cents per share, up from 17 cents paid last time. Concurrently, the company announced a preferred stock dividend of 21 cents. This also marks an increase of about 23.5% from the prior preferred dividend. Both the dividends will be paid on December 27 to stockholders of record as on December 13.
This hike is the second one since BankUnited started paying dividends in 2011. Earlier in February 2012, the company raised its dividend from 14 cents per share to 17 cents.
The announcement of the dividend raise comes on the back of BankUnited’s strong capital position. As of September 30, 2012, the company’s tier 1 leverage ratio was 12.9% while tier 1 risk-based capital ratio was 34.3%. Further, cash and cash equivalents exiting the third quarter totaled $346.6 million. These sturdy financials well support the company’s decision to boost its dividend.
In the last one month, many companies in the financial sector have announced improved capital deployment plans. Notable among those are Waddell & Reed Financial Inc. ( WDR - Analyst Report) , Franklin Resources Inc. ( BEN - Analyst Report) , City National Corp. and Commerce Bancshares, Inc. ( CBSH - Analyst Report) . Almost all the abovementioned companies have announced a rise in regular cash dividend as well as special cash and stock dividends.
We believe that even after announcing dividend hikes, BankUnited will be able to maintain its strong capital and balance sheet levels. This would position the company comfortably for expansion via acquisitions as well as through organic growth.
BankUnited currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We believe the announcement of dividend rise will be an appropriate step for the company in boosting shareholders’ confidence, which might lead to positive estimate revisions. This, in turn, could cause an improvement in the Zacks Rank.