Navient (NAVI) Rewards Shareholders With New Share Buyback

Navient (NASDAQ:NAVI) Corporation NAVI announced that its board of directors consented to a new share buyback program of up to $1 billion with immediate effect. This strategic move will likely enhance shareholder value.

Following this announcement, Navient's stock gained 1.06%, reflecting investors' optimism on the same.

This new share repurchase authorization comes with no expiration date. Moreover, it is in addition to the $150-million unused buyback authorization (as of Sep 30, 2021) under the $1-billion program approved in October 2019. Navient anticipates completing the remainder of the 2019 authorization by 2021 end and expects utilizing $400 million of the new program in 2022.

Jack Remondi, president and CEO of Navient, said, “We remain focused on investing capital to support new loan originations and overall business growth. This includes maintaining appropriate capital that supports our credit ratings and enhances ongoing access to financing. Our capital return policy is consistent with these objectives.”

Though these initiatives to increase shareholders’ wealth look encouraging, Navient’s debt/equity compares unfavorably with its peers, indicating that these capital-deployment activities might not be sustainable.

Nonetheless, capital-deployment activities are not the only factor to be considered while judging a company. Investors interested in this currently Zacks Rank #3 (Hold) stock can take a look at its fundamentals and growth opportunities.

Following the receipt of all necessary approvals in October 2021, Navient transferred all its Department of Education servicing contract to Maximus (NYSE:MMS). This will likely help Navient amplify focus on domains outside government student loan servicing. The economic recovery and declining unemployment rate should further enhance its business prospects.

Its continued focus on leveraging the asset recovery and processing businesses will boost revenues. Navient also continues to make cost-control efforts via increased automation and the incorporation of artificial intelligence. Through its capital-efficient fee businesses and efforts to leverage on scaled infrastructure and technical expertise, NAVI expects to improve efficiencies across its businesses. We expect such efforts to also aid NAVI's bottom-line growth in the days to come.

Backed by these strong fundamentals, Navient’s shares have jumped 114.1% so far this year, outperforming 38.3% growth of the industry it belongs to.

Image Source: Zacks Investment Research

Currently, Navient carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Firms That Took Similar Action

Over the past couple of months, several banks have rewarded their shareholders with new share-repurchase programs. Some of these are Washington Trust Bancorp, Inc. WASH, United Community Banks (NASDAQ:UCBI), Inc. UCBI and Merchants Bancorp (NASDAQ:MBIN) MBIN.

Washington Trust’s board of directors approved a repurchase of about 5% of its outstanding common stock or 850,000 shares. WASH’s new buyback plan expires on Dec 31, 2022.

As of Oct 31, 2021, Washington Trust had 17.3 million shares outstanding.
United Community Banks’ board of directors approved a buyback of up to $50 million of UCBI’s outstanding shares. The plan will expire on Dec 31, 2022.

The new repurchase plan replaces the previous one, which authorized United Community Banks to buy back up to $50 million shares through Dec 31, 2021.

Merchants Bancorp’s board of directors okayed the renewal and expansion of its share repurchase program of up to $75 million. The share buyback plan will expire on Dec 31, 2023.

This apart, Merchants Bancorp announced a three-for-two stock split. MBIN’s shareholders of record as of Jan 3, 2022, will be eligible to receive one additional share for every two shares they own from the company’s common stock.

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