WFSL Washington Federal, Inc. (MM)

On Monday, Washington Federal Inc. (WFSL) announced that its board of directors has authorized a new share repurchase program, under which the company will be able to buyback additional 10 million common shares.

WFSL stated that this new share repurchase authorization is an extension of its current program. The current program, announced in 1995 with no expiration date, authorizes the company to repurchase 21,956,264 shares.

During the quarter ending June 30, WFSL repurchased 1,654,800 shares at an average price of $15.72. Further, the company has already bought back a total of 2,304,800 shares (average price $15.87) in fiscal 2011. Hence, the company has 583,514 shares left under its current repurchase program.

WFSL’s board of directors also declared a quarterly dividend of 6 cents payable on July 22 to the shareholders of record as of July 8. In December 2010, the company had hiked its quarterly cash dividend by 20% to the present level from 5 cents per share. This was preceded by a 2.4% dividend increase in July 2007. However, following the financial crisis, the company was compelled to lower its dividend in December 2008.

Though we remain concerned about the pressure on the net interest margin and the company’s considerable exposure to a soft real estate market, we believe interest income expansion and non-performing asset contraction will significantly support the bottom line. Further, the new share repurchase authorization will boost investors’ confidence in the stock.

WFSL currently retains a Zacks # 2 Rank, which translates into a short-term ‘Buy’ rating. One of WFSL’s competitors, Astoria Financial Corporation (AF), also retains a Zacks # 2 Rank.

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