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Fifth Third (FITB) Declares 12.5% Dividend Hike: Time to Buy?

Zacks Equity Research
Updated
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Fifth Third Bancorp FITB has raised its quarterly common stock dividend by about 12.5% to 18 cents per share. The dividend will be paid on Jul 16 to shareholders of record as of Jun 29, 2018.

Fifth Third’s robust business model reflects the company’s commitment toward returning value to shareholders with its strong cash-generation capabilities. Prior to this revision, the company had raised its quarterly dividend to 16 cents per share in September 2017, marking a 14.3% hike.

In 2017, Fifth Third submitted a capital plan to the Federal Reserve Board, seeking approval for dividend hike and common stock repurchases. The move followed the Fed’s approval of dividend hike and stock buyback after the completion of stress tests to assess banks’ financial position.

Considering last day’s closing price of $30.57 per share, the dividend yield is currently valued at 2.36%. Additionally, the company has a share repurchase program in place. Notably, in February 2018, the company’s board of directors authorized a new share repurchase program of up to 100 million shares, replacing the previous buyback plan.

Investors interested in this Zacks Rank #1 (Strong Buy) stock can have a look at the bank’s fundamentals and growth prospects.

Revenue Growth: Fifth Third continues to make steady progress toward bolstering its revenues. The company has expanded its non-interest income base, which now represents more than 47% of total revenues, and expects fee income to increase in the near term. Also, it is focused on strategic investments through North Star initiatives, which are expected to result in revenue growth, expense savings and operational excellence.

The company’s projected sales growth (F1/F0) of 9.04% indicates constant upward momentum in revenues.

Earnings Per Share Strength: This banking giant has witnessed earnings growth of 3.07% in the last three-five years. Additionally, the company’s long-term (three-five years) estimated EPS growth rate of 7.88% promises rewards for investors over the long run. Good news is that the company pulled off an average positive earnings surprise of 9.73% over the trailing four quarters.

Stock Looks Undervalued: The stock currently has a Value Score of B. The Value Score condenses all valuation metrics into one actionable score that helps investors steer clear of “value traps” and identify stocks that are truly trading at a discount. Our research shows that stocks with a Style Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential.

Share Price Movement: Fifth Third’s shares have gained 20.8% over the past year compared with 13.7% growth recorded by the industry.



Other Stocks to Consider

Comerica Incorporated CMA has been witnessing upward estimate revisions for the last 30 days. Additionally, the stock jumped more than 30% over the past six months. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

M&T Bank Corporation MTB has been witnessing upward estimate revisions for the last 30 days. Also, the company’s shares have risen nearly 8.1% over the past year. It holds a Zacks Rank #2, at present.

KeyCorp KEY has been witnessing upward estimate revisions for the last 60 days. In a year’s time, this Zacks #2 Ranked company’s share price has been up more than 11%.

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Fifth Third Bancorp (FITB) : Free Stock Analysis Report
 
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