Ushering in good news for the shareholders of
Fifth Third Bancorp
), the company announced a 25% hike in its third quarter dividend
yesterday. It will now pay a cash dividend on its common shares of
10 cents per share, up from 8 cents paid earlier. The enhanced
dividend will be paid on October 18, 2012 to shareholders of record
as of September 28, 2012.
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This move represents an increase in dividend for the third time
post the dividend cuts made by Fifth Third during the financial
crisis. The company had drastically slashed its dividend to 15
cents per share from 44 cents in June 2008 and further lowered it
to a penny in December that year. However, in March last year, the
company raised it to 6 cents and further advanced it to 8 cents in
This latest dividend hike comes after Fifth Third's proposed
capital plan through March 2013 received the Federal Reserve's nod
last month, which included a possible increase in its dividend in
the third quarter as well as share buybacks. The approval, which
comes following a review of Fifth Third's resubmitted capital plan,
justifies the company's capital strength.
As a matter of fact, though a number of Wall Street biggies such as
Wells Fargo & Co.
), passed the stress test earlier this year with their proposed
capital plans, companies such as Fifth Third and
) faced a setback as the Fed objected to their capital plans and
these companies had to resubmit it again.
In addition to a positive development on the dividend front, last
month Fifth Third's Board of Directors approved a new share buyback
authorization of 100 million shares. This replaced the previous
authorization from 2007 that had 14 million shares remaining.
As a matter of fact, Fifth Third's capital plan includes potential
share repurchases of up to $600 million through the first quarter
of 2013, plus any incremental buybacks related to any after-tax
gains from the
In March this year, the Fed's objection to a number of elements in
Fifth Third's capital plan, including increases in its quarterly
common dividend and the initiation of common share repurchases, had
put the company on the back foot and considerably weakened its
competitive position. Therefore, a positive development on that
front is encouraging and this will inspire investors' confidence in
Fifth Third currently retains its Zacks #2 Rank, which translates
into a short-term Buy rating. However, considering its
fundamentals, we have a long term Neutral recommendation on the