) is the latest to join the list of banks coming up with dividend
hikes after qualifying the stress test conducted by the Federal
Reserve. The company declared a 66.7% increase in its quarterly
common stock dividend to 5 cents per share. The dividend is payable
on June 15 to shareholders of record as of May 29.
The hike reflects KeyCorp's continuous effort towards
maximization of shareholder value through its strong cash
generation capabilities. Earlier, in July 2011, company had
increased its dividend by an impressive 50% to 3 cents per
The capital plan submitted by KeyCorp to the Federal Reserve as
a part of the stress test included a common stock repurchase
program of $344 million and evaluation of a quarterly dividend
In March 2012, KeyCorp's capital plan got approved after
clearing Fed's stress test that involved assessment of banks'
capacities to withstand a severe economic crisis. After receiving
the regulatory approval, KeyCorp decided to go ahead with the stock
repurchase plan as well as the dividend hike.
Moreover, the Board of Directors at Keycorp announced a cash
dividend of $1.9375 per share on the outstanding 7.750%
Non-Cumulative Perpetual Convertible Preferred Stock, Series A, to
holders of record as of May 31 for the period commencing on March
15 to the dividend payable date of June 15.
Similar moves by other banks
Several other banks, after clearing the stress test, declared
dividend hikes and stock repurchase plans. Notable names include
Northern Trust Corporation
JPMorgan Chase & Co.
). Northern Trust declared a dividend increase of 7.1% and a $240
million stock repurchase program. Similarly JPMorgan announced a
20% hike in its dividend as well as a whopping $15 billion stock
We believe the dividend increase and extensive share repurchase
plan will enhance investor confidence in the stock, thereby
boosting the share prices. Moreover, returning capital to
shareholders under apt circumstances will improve KeyCorp's
accessibility to long-term capital.
Shares of KeyCorp currently carry a Zacks #3 Rank, which
translates into a short-term 'Hold' rating. Considering the
fundamentals, we are also maintaining a long-term 'Neutral'
recommendation on the shares.
JPMORGAN CHASE (JPM): Free Stock Analysis
KEYCORP NEW (KEY): Free Stock Analysis Report
NORTHERN TRUST (NTRS): Free Stock Analysis
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