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Discover Financial Services Beats Estimates, Raises Dividend (DFS)

The credit card business continues to chug along as Discover Financial Services ( DFS ) continues the trend of credit card-related firms beating analyst estimates.

The company reported Q4 EPS of $0.95, $0.03 better than the analyst estimate of $0.92.

Fourth Quarter Highlights:

- Total loans grew 17% from the prior year to a record $57.3 billion. The company purchased an additional $2.4 billion in private student loans in the fourth quarter.

- Credit card loans grew 3% from the prior year and Discover card sales volume was up 8%.

- The delinquency rate for credit card loans over 30 days past due continued to improve, declining to 2.39%. The credit card net charge-off rate declined to 3.24%.

- Payment Services pretax income was up 35% from the prior year to $42 million. Transaction volume for the segment was $43.3 billion in the quarter, an increase of 7% from the prior year.

The company also declared a quarterly dividend of $0.10 per share, or $0.4 annualized. This is a 66.7% increase from the prior dividend of $0.06.

The dividend will be payable on January 19, 2012, to stockholders of record on December 29, 2011, with an ex-dividend date of December 27, 2011.

The Bottom Line

Shares of Discover Financial Services ( DFS ) will now have a 1.68% dividend yield, based on the higher dividend payout and last night's closing stock price of $23.82. The stock has technical support in the $21-$22 price area. If the shares can firm up, we see overhead resistance around the $26 price level.

Discover Financial Services ( DFS ) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.4 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks , as well as a detailed explanation of our ratings system here .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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