State Street Rewards Investors With $2.2 Billion Capital Plan

Apr 3 2014, 12:56pm CDT | by

State Street recently announced plans to buy back shares worth $1.7 billion between now and the end of March 2015, while also hiking common share dividends by 15%. Last year, the bank initiated the biggest share buyback in its history after getting the Federal Reserve’s approval on its plans to eliminate $2.1 billion worth of its shares from the equity market. The Fed did not have any problems clearing State Street’s capital plans this time either, given that the bank aced this year’s stress tests with the highest core Tier 1 common capital ratio figures among the 30 banks tested (see Fed Stress Test For Banks: Rationale, Results & Implications).

We maintain our price estimate for State Street’s stock at $78, which is about 10% ahead of current market prices.

See our full analysis for State Street here

A quick glance through State Street’s dividend payment history shows that the bank raised its dividend at least once a year between 1995 and 2001, with the frequency doubling over the period from 2001 to 2008. But as is evident from the table below, State Street does not have a great record of returning too much cash to investors. The bank handed out less than $400 million in dividends at its peak dividend rate in 2008. The numbers nearby have been taken from the bank’s annual reports (see below).

State Street’s focus on returning money to investors in recent years is demonstrated by the fact that the custody bank has repurchased almost $3.5 billion worth of shares over 2012-2013. As a direct result, the average number of its outstanding shares has fallen more than 10% from about 500 million in 2011 to under 450 million in 2013.

(in $ mil) 2007 2008 2009 2010 2011 2012 2013
Common Stock Dividends 301 399 168 20 295 463 486
Shares Repurchased 1,002 - - - 675 1,440 2,040
Total 1,303 399 168 20 970 1,903 2,526

Assuming State Street’s board approves the dividend hike starting Q2 2014, the bank will pay shareholders $0.30 per share for three quarters this year – implying dividends of $1.16 per share for the year 2014. This points to a little less than $500 million in common stock dividends for the year, if the number of shares stays constant at 430 million (though it will likely decline). That combined with the proposed $1.7 billion share buyback plan means that the bank will return $2.2 billion cash to its investors this year. While this is 12% lower than the $2.5 billion figure for 2013, it is still the second highest payout by State Street in its history.

We represent these payouts in our analysis of State Street in the form of an adjusted dividend payout rate shown in the chart below. As this payout rate was not meaningful in 2009, we represent it in the chart as 0%.

See More at Trefis | View Interactive Institutional Research (Powered by Trefis)

Like our charts? Embed them in your own posts using the Trefis WordPress Plugin.

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Mali confirms two new Ebola cases
United Nations, Nov 26 (IANS) Mali has confirmed two new cases of Ebola, bringing to total number of cases in the West African nation to eight, days ahead of the opening of a new UN Ebola response office.
 
 
Merkel warns of recession in Europe
Berlin, Nov 26 (IANS) German Chancellor Angela Merkel Tuesday warned that Europe could slide back into recession, media reported.
 
 
India, Nepal ink nine deals; Modi inaugurates trauma centre, bus service (Roundup)
Kathmandu, Nov 25 (IANS) Nepal's happiness "gives us joy", Prime Minister Narendra Modi said here Tuesday on his second visit to the Himalayan country in 100 days as both sides inked nine agreements, further cementing their close ties.
 
 
India, Nepal ink 10 deals; Modi inaugurates trauma centre, bus service (Intro Roundup)
Kathmandu, Nov 25 (IANS) Nepal's happiness "gives us joy", Prime Minister Narendra Modi said here Tuesday on his second visit to the Himalayan country in 100 days as both sides inked 10 agreements, including on $1 billion assistance to Nepal.
 
 
 

Latest from the Network

Former Chelsea manager Grant to coach Ghana
Accra, Nov 26 (IANS) Former Chelsea manager Avram Grant will officially sign a contract to become the new Ghana coach, the country's football federation (GFA) said Wednesday. The "governmental agreement" was needed...
Read more on Sport Balla
 
Brown family lawyer denounces 'completely unfair' process
Washington, Nov 26 (IANS/EFE) The attorney for the family of Michael Brown had harsh words about the Missouri prosecutor who convened the grand jury that declined to indict white police officer Darren Wilson in the Aug...
Read more on Politics Balla
 
Champions League standings
London, Nov 26 (IANS) Following are the Champions League Group A-D standings ahead of Wednesday's fifth round of matches (tabulated under matches played, won, drawn, lost, goals for, against, points), according to...
Read more on Sport Balla
 
US urges eradication of armed rebels in Congo
Washington, Nov 26 (IANS) The US Tuesday called for efforts to wipe out illegal armed groups in eastern Democratic Republic of the Congo (DRC), as the number of civilians killed there has risen to some 200 in less than...
Read more on Politics Balla
 
Eating healthy tough for Cumberbatch
Los Angeles, Nov 26 (IANS) Actor Benedict Cumberbatch says he struggles to eat health food. The "Sherlock" star says that despite trying his best to maintain his nutritious diet, he often struggles to keep it up while...
Read more on Celebrity Balla
 
24 killed in coal mine fire in China
Beijing, Nov 26 (IANS) At least 24 workers were killed and 52 others injured in coal mine fire in northeast China's Liaoning Province early Wednesday, the state-owned Liaoning Fuxin Coal Corporation said. The fire...
Read more on Politics Balla
 
Jordin Sparks hits out at Jason Derulo
Jordin Sparks has taken a swipe at her ex-boyfriend Jason Derulo in a song. The 24-year-old beauty appears to take aim at her former lover, with whom she had a three-year relationship that ended in September, in her...
Read more on Celebrity Balla
 
Eva Mendes reveals motherhood has brought 'wild nights'
Eva Mendes has had some of the ''wildest nights'' of her life since giving birth to her first child, Esmeralda Amada. The 40-year-old actress, who has been dating Ryan Gosling since 2011, gave birth six weeks ago and...
Read more on Celebrity Balla
 
Cate Blanchett feels judged by other mothers
Cate Blanchett feels her parenting skills are being judged by other mothers. The Oscar-winning actress has three children - Dashielle, 12, Roman, 10 and Ignatuis, six - and says she's held to a different set of...
Read more on Celebrity Balla
 
Jimmy Page reveals his admiration of Leona Lewis
Jimmy Page says performing with Leona Lewis was one of the highlights of his career. The Led Zepplin guitarist was asked to name the greatest moment of his professional life outside of the band and he cited performing...
Read more on Celebrity Balla