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Fifth Third Enhances Shareholder Value - Analyst Blog

By: Zacks.com
Posted: 6/20/2013 5:29:00 PM
Referenced Stocks: FITB;KEY;USB;ZION

Fifth Third Bancorp ( FITB ) announced a 9% hike in its quarterly dividend. This is in line with the company's 2013 capital plan which was approved by the Federal Reserve.

With this hike, Fifth Third's quarterly dividend figure reached to 12 cents. The dividend will be paid on Jul 18, 2013 to shareholders of record as on Jun 28, 2013. The company had also increased its dividend by 10% to 11 cents in the last quarter as well.

The dividend hikes evince the company's healthy capital position. At the end of the first quarter, Fifth Third's Tier I common equity ratio improved 19 basis points (bps) sequentially to 9.70%. Tier I capital ratio increased 18 bps sequentially to 10.83%.

Fifth Third's earnings power has been helping it strengthen its capital position. The company has delivered positive earnings surprises in the last 4 quarters. With an expected earnings growth rate of 9.2%, the company is expected to continue returning capital to its shareholders.

Fifth Third's 2013 capital plan also includes redemption of trust preferred securities (TruPS) worth $750.0 million and share repurchases worth $984 million. The repurchase will include shares worth $550.0 million issued as a result of Series G preferred stock conversion. Further the company also intends additional share repurchases with the after-tax proceeds from sale of its stake in Vantiv, Inc.

Dividend Hikes by Other Banks

Similar to Fifth Third, other banks that increased their dividends following the Fed's approval include U.S. Bancorp ( USB ) - 18% to 23 cents, Zions Bancorp . ( ZION ) -300% to 4 cents and KeyCorp. ( KEY ) - 10% to 5.5 cents.

Conclusion

Diversified footprints of Fifth Third enable it to utilize the benefits from the recovering economy. Additionally, the company's improving credit quality, rising loans and deposits, as well as stable balance sheet reflects its growth prospects.

Fifth Third's efforts to enhance shareholder value thorough dividend and share repurchase activities make it an attractive pick for yield-seeking investors.

Currently, Fifth Third carries a Zacks Rank #3 (Hold).



FIFTH THIRD BK (FITB): Free Stock Analysis Report

KEYCORP NEW (KEY): Free Stock Analysis Report

US BANCORP (USB): Free Stock Analysis Report

ZIONS BANCORP (ZION): Free Stock Analysis Report

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