Last week, Capital One Financial Corporation (COF - Free Report) announced a whopping 500% hike in its quarterly cash dividend. It came subsequent to the Federal Reserve’s approval of the company’s capital plan in March.
Capital One declared a quarterly cash dividend of 30 cents per share. This dividend will be paid on May 23, to shareholders of record as on May 13. Hence, the annual dividend payable to shareholders comes to $1.20 per share. Moreover, this dividend yields 2.1% on the company’s share price of $58.52 on May 3, 2013.
Notably, this is the first time that Capital One hiked its dividend since the financial crisis. In the midst of the recession, the company had slashed its dividend from 37.5 cents per share to 5 cents and maintained the same till Jan 2013.
Concurrently, Capital One announced a quarterly dividend of $15.00 per share on its 6.00% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series B. This dividend will be paid on Jun 3 to stockholders of record as on May 17.
Apart from Capital One, other banks that increased their dividends after the Fed’s consent include SunTrust Banks, Inc. (STI - Free Report) , Regions Financial Corporation (RF - Free Report) and Zions Bancorp. (ZION - Free Report) . SunTrust hiked its cash dividend by 100% to 10 cents per share, Regions increased its dividend threefold to 3 cents and Zions declared a 300% dividend rise to 4 cents.
We believe that the latest boost in Capital One’s dividend reflects its commitment to return value to shareholders through its strong cash generation capabilities. Moreover, the company has healthy capital and liquidity levels. As of Mar 31, 2013, Tier 1 risk-based capital ratio and total risk-based capital ratio were 12.2% and 14.4%, respectively.
Currently, Capital One retains a Zacks Rank #3 (Hold).