Increased Dividend Payout a 'Top Priority' at State Street - And Other Banks Too?
Gary Townsend submits:Many financial companies will significantly increase their common stock dividends this year. In an article here last January 3rd, we identified seven firms that are most likely to announce higher dividends in the next few weeks. Among those was State Street Corporation (STT), which yesterday held an investor day. State Street is one of the world’s largest asset managers and financial services providers. It was profitable throughout the economic downturn, financial panic of 2008, its aftermath, and subsequent economic recovery. In 4Q2008, it cut its quarterly dividend from $0.24 to $0.01, a current dividend yield of 0.08% based on yesterday’s closing price of $47.78. Consensus earnings estimates are $3.69 and $4.28 in 2011 and 2012, respectively. Following its December securities portfolio restructuring, STT projected a pro-forma Basel III Tier 1 common ratio at 9.4%, well above the projected 7-8% requirement for “systemically significant” banks. At its conference yesterday, STT listed as a “top priority” a return to a 20-25% dividend payout ratio. The company also intends to repurchase shares in amounts equal to the previous 3 years’ employee issuances (18 million shares, 4% of outstanding shares, and equivalent to $860 million). As a Supervisory Capital Assessment Program (SCAP) bank, STT submitted a capital plan to Treasury in January, that likely contained a dividend increase proposal. We expect Treasury to approve its plan in coming weeks. A 1Q2011 dividend declaration, typically scheduled at the end of February, might be delayed to accommodate Treasury’s approval timeline. Based on consensus 2011 EPS estimates,Complete Story »