US Bancorp announces dividend, buyback

The company made the moves hours after the Federal Reserve announced the latest stress-test results.

By Jim J. Jubak Mar 15, 2012 2:33PM
That didn't take long.

Hours after the Federal Reserve announced on March 13 that US Bancorp (USB) was one of the 15 financial companies that had passed its annual stress test (for more on the stress-test and winners and losers see my post) and could therefore go ahead with plans to raise dividends and increase its share buyback program -- the Minnesota-based bank did exactly that.

The board of directors approved a 56% increase in dividends to a quarterly 19.5 cents a share (78 cents annually) payable on April 16 to shareholders of record on March 30. (US Bancorp is a member of my Jubak's Picks portfolio.)

The board of directors also authorized a new stock-buyback plan of up to 100 million shares through March 2013. (The bank has 1.91 billion shares outstanding before the buyback.)

The new annual dividend of 78 cents a share takes the yield on US Bancorp shares up to 2.48% from the current 1.61% at the price of $31.48 the stock traded at Thursday afternoon.

I added this stock to my picks on March 26, 2010 in anticipation that the bank would work to restore its pre-Lehman payout level and that the bank was in a strong capital position that would allow it to pick up market share in its core businesses.

I think that thesis still has a way to run. I'd raise my target price on these shares, currently at $33, to $35 by October 2012.

At the time of this writing, Jim Jubak didn't own shares of any companies mentioned in this post in personal portfolios. The mutual fund he manages, Jubak Global Equity Fund (JUBAX), may or may not own positions in any stock mentioned. The fund did own shares of US Bancorp as of the end of December. For a full list of the stocks in the fund as of the end of the most recent quarter, see the fund's portfolio here. 
Tags: USB
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