Following the approval its capital plan in Mar 2013, KeyCorp (KEY - Free Report) announced a 10% hike in its quarterly dividend. The Federal Reserve had sanctioned the company’s capital plan under the 2013 Comprehensive Capital Analysis and Review (CCAR).
KeyCorp declared a quarterly cash dividend of 5.5 cents per share. The dividend will be paid on Jun 14 to shareholders of record on May 28.
Moreover, KeyCorp’s capital plan includes share repurchase program worth $426 million. The company intends to complete the buyback of shares by the end of first-quarter 2014, through either the open market or privately-negotiated transactions.
Further, KeyCorp declared that it received the Fed’s approval for additional capital deployment through share purchases from the sale of Victory Capital Management and Victory Capital Advisors to Crestview Partners – a private equity firm. The divestiture, announced in Feb 2013, will likely be completed by third quarter-end. Of the total sale price, $201 million is in cash, while the remaining $45 million is a seller note, whose final value will be determined by the end of the year.
The Fed’s consent pertains to the after-tax net gain on the cash amount of the sale. KeyCorp anticipates after-tax gain to range from $120–$125 million. The company plans to request for more capital deployment on the after-tax gains related to the final value of the seller’s note in 2014.
Concurrently, KeyCorp announced a dividend of $1.9375 per share on 7.750% Non-Cumulative Perpetual Convertible Preferred Stock, Series A. This dividend will be paid on Jun 17, to shareholders of record as of May 31, for the period from Mar 15 to Jun 15.
Apart from KeyCorp, other banks that increased their dividends after the Fed’s approval include SunTrust Banks, Inc. (STI - Free Report) , Capital One Financial Corporation (COF - Free Report) and Zions Bancorp. (ZION - Free Report) . Capital One hiked its dividend 500% to 30 cents per share, SunTrust 100% to 10 cents and Zions 300% to 4 cents.
We believe that the latest boost in KeyCorp’s dividend reflects its commitment to return value to shareholders through its strong cash generation capabilities. Moreover, the company has a healthy capital and liquidity level.
Currently, KeyCorp carries a Zacks Rank #3 (Hold).