Financial services company U.S. Bancorp (USB) is allowed to follow through on its plans to raise its dividend, the Federal Reserve said late Thursday.
Following the results on the Fed’s stress test known as the Comprehensive Capital Analysis and Review, U.S. Bank can go through with its dividend and share buyback plans.
However, the hike in dividend will not take place until the second quarter of 2013. The first quarter dividend, declared on Thursday, will be paid on April 15 with an ex-dividend date of March 26. This quarterly dividend is 19.5 cents per share.
In June, the U.S. Bank Board of Directors will meet to officially approve the next dividend increase. It is expected to rise 18% to 23 cents per share each quarter. This will make the annualized dividend payout 92 cents per share.
Furthermore, U.S. Bank has approved a one-year authorization to repurchase $2.25 billion in common stock to start on April 1. This new share buyback plan will replace the previous program that expires on March 31.
“We are very pleased to receive the Federal Reserve’s non-objection to our plan to increase our dividends and authorize a new share repurchase program,” said Richard K. Davis, CEO of U.S. Bancorp. “Our Company’s ability to generate capital, even under extraordinarily adverse economic conditions, is well proven by the results of this year’s CCAR. Given these results, we expect to recommend an 18 percent increase to the dividend rate in June, as we align our yearly dividend increases with the annual CCAR process going forward. Our goal is to return 60 to 80 percent of our earnings each year to shareholders through dividends and share buybacks, and our planned capital actions will allow us to, once again, achieve that goal in 2013.”
U.S. Bank shares were down 10 cents, or -0.29%, during pre-market trading on Friday. The stock is up +14.6% over the past twelve months.
The Bottom Line
Shares of U.S. Bank (USB) have a dividend yield of 2.29% based on last night’s closing price of $34.06 and the company’s annualized dividend payout of 78 cents per share.
U.S. Bancorp (USB) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.4 out of 5 stars.