Last week, the board of
Discover Financial Services
) approved a new share repurchase program worth $2.4 billion. The
new repurchase program replaced the company's previous $2 billion
repurchase program, which had remaining authorization worth $600
million as of Mar 14, 2013.
DFS' new repurchase authorization is valid till Mar 31, 2015.
However, the company can terminate the repurchase program any
time before that.
However, Discover Financial has received Federal approval for
its capital plans till Mar 31, 2014 only. Thus, the company needs
to obtain a no-objection from the Federal Reserve for its 2014
capital plan before repurchasing any shares after Mar 31,
The authorization for this new repurchase program was a part
of DFS's 2013 capital plan, which was submitted to the Federal
Reserve for review. The capital plan also includes a proposal to
increase the quarterly dividend to 20 cents per share from 14
cents paid earlier. This proposal of a 43% dividend hike will be
considered by Discover Financial's board of directors in
Discover Financial has a healthy capital and cash position,
which facilitates the maintenance of an efficient capital
deployment strategy. The company utilizes its excess capital for
strategic acquisitions, apart from share buybacks and dividend
payments. The company authorized a $2 billion share repurchase
program in Mar 2012, to replace the previous $1 billion program.
Moreover, the strong cash position and future outlook influenced
management to increase DFS's dividend twice in 2011.
Discover Financial currently carries a Zacks Rank #2 (Buy).
Other companies worth considering in the financial sector are
Encore Capital Group, Inc.
Global Payments Inc.
Total System Services, Inc.
), which carry a Zacks Rank #2 (Buy).
DISCOVER FIN SV (DFS): Free Stock Analysis
ENCORE CAP GRP (ECPG): Free Stock Analysis
GLOBAL PAYMENTS (GPN): Free Stock Analysis
TOTAL SYS SVC (TSS): Free Stock Analysis
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