DFS' New Share Repurchase Program - Analyst Blog
18 Marzo 2013 - 12:20PM
Zacks
Last week, the board of Discover Financial
Services (DFS) approved a new share repurchase program
worth $2.4 billion. The new repurchase program replaced the
company’s previous $2 billion repurchase program, which had
remaining authorization worth $600 million as of Mar 14, 2013.
DFS’ new repurchase authorization is valid till Mar 31, 2015.
However, the company can terminate the repurchase program any time
before that.
However, Discover Financial has received Federal approval for
its capital plans till Mar 31, 2014 only. Thus, the company needs
to obtain a no-objection from the Federal Reserve for its 2014
capital plan before repurchasing any shares after Mar 31, 2014.
The authorization for this new repurchase program was a part of
DFS’s 2013 capital plan, which was submitted to the Federal Reserve
for review. The capital plan also includes a proposal to increase
the quarterly dividend to 20 cents per share from 14 cents paid
earlier. This proposal of a 43% dividend hike will be considered by
Discover Financial’s board of directors in April.
Discover Financial has a healthy capital and cash position,
which facilitates the maintenance of an efficient capital
deployment strategy. The company utilizes its excess capital for
strategic acquisitions, apart from share buybacks and dividend
payments. The company authorized a $2 billion share repurchase
program in Mar 2012, to replace the previous $1 billion program.
Moreover, the strong cash position and future outlook influenced
management to increase DFS’s dividend twice in 2011.
Discover Financial currently carries a Zacks Rank #2 (Buy).
Other companies worth considering in the financial sector are
Encore Capital Group, Inc. (ECPG), Global
Payments Inc. (GPN) and Total System Services,
Inc. (TSS), which carry a Zacks Rank #2 (Buy).
DISCOVER FIN SV (DFS): Free Stock Analysis Report
ENCORE CAP GRP (ECPG): Free Stock Analysis Report
GLOBAL PAYMENTS (GPN): Free Stock Analysis Report
TOTAL SYS SVC (TSS): Free Stock Analysis Report
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