Following the approval its capital plan in Mar 2013,
) 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.
Capital One Financial Corporation
). 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).
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