U.S. Bancorp Announces Additional Share Buyback Of Up To $2.5B

U.S. Bancorp (NYSE:USB) recently announced an additional share-repurchase program of up to $2.5 billion, following the Fed’s approval.

This adds to June’s buyback authorization of up to $3 billion, which commenced on Jul 1. The company intends to make these repurchases through Jun 30, 2020.

Andy Cecere, chairman, president and CEO of U.S. Bancorp, noted, “This capital distribution reflects our ability to prudently manage capital as we respond to changes in the regulatory landscape, while continuing to invest in our future.”

U.S. Bancorp, along with many other financial institutions, needs to clear Fed’s annual stress tests, in order to get approval for capital plans. Some of these institutions include Bank of America (NYSE:BAC) , JPMorgan (NYSE:JPM) and Goldman Sachs (NYSE:GS) .

Alongside share repurchase, the company is also active in dividend payments. Since 2011, U.S. Bancorp has been raising its dividend consistently. The company’s 2019 capital plan also included a 13.5% hike in quarterly dividend announced in September. Prior to this, it had raised its dividend by 23% last September.

U.S. Bancorp has returned 80% of its earnings to shareholders through dividends and share repurchases as of Sep 30 2019, which is at the higher end of the targeted payout ratio of 60-80%.

Our Take

Driven by a healthy liquidity position, U.S. Bancorp remains well poised to increase shareholders’ wealth through regular dividend payments and share buybacks. Further, the company’s capital-deployment activities look sustainable, given the lower debt/equity ratio compared with its peers, along with robust earnings strength.

Shares of the company have gained 28% so far this year compared with 29.5% growth recorded by the industry.

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

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