KeyCorp (KEY) Rewards Investors With 42% Dividend Increase

KeyCorp’s KEY board of directors has approved a 41.7% hike in the quarterly common stock dividend. The revised quarterly dividend is now 17 cents per share compared with the prior figure of 12 cents. The dividend is payable on Sep 14 to shareholders on record as of Aug 28.

Prior to this hike, the company raised its dividend by 14.3% cents per share in May 2018.

Along with the common stock dividend, the company will also pay a dividend of $312.50 on the corporation's outstanding Fixed-to-Floating Rate Perpetual Non-Cumulative Preferred Stock, Series D, on Sep 17 to shareholders on record as of Aug 31 for the Jun 15-Sep 15 period.

Also, the company announced its plan to pay a dividend of $15.31, on the corporation's outstanding Fixed-to-Floating Rate Perpetual Non-Cumulative Preferred Stock, Series E, on Jun 15 to its shareholders as of May 31, for the Mar 15-Jun 15 period.

We remain optimistic about its potential to continue enhancing shareholder value, driven by strong cash-generation capabilities.

Considering last day’s closing price of $19.91 per share, the dividend yield is currently valued at 3.4%.

Investors interested in this Zacks Rank #3 (Hold) stock can have a look at its fundamentals and growth prospects.

Earnings Strength: KeyCorp depicts stable earnings picture. In the past three to five years, the bank witnessed earnings per share (EPS) growth of 8.7%, higher than the industry average of 5.3%. Also, the company’s earnings are projected to grow more than 33% in 2018 compared with 30.9% rally for the industry.

Further, the company’s long-term (three-five years) EPS growth rate of 9.5% promises rewards for shareholders.

Revenue Growth: Organic growth has remained strong for KeyCorp, which can be seen from its revenue story. Revenues witnessed a CAGR of 15.3% over the last four years (2014-2017), with the trend continuing in the first three months of 2018.

The company’s projected sales growth rate of 3.6% for 2018 and 4.7% for 2019 indicates constant upward momentum in revenues.

Credit Quality: Improving credit quality continues to be a growth catalyst for KeyCorp. The bank has been witnessing a decline in provision for loan losses over the past several quarters. For 2018, management anticipates the net charge-offs rate to be lower than the target range while provisions are expected to rise modestly, given the loan growth.

Stock Undervalued: KeyCorp has a P/E (F1) ratio and PEG ratio of 11.8 and 1.24 compared with the industry’s average of 12.68 and 1.36, respectively. Based on these ratios, the stock seems undervalued.

However, the company’s shares have gained 5.1% in the past year, underperforming 9.1% growth for the industry it belongs to.

A few better-ranked stocks in the same space are M&T Bank Corporation MTB, BOK Financial Corporation BOKF and Community Bank System CBU.

Shares of M&T Bank have gained 4.5% over the past 12 months. Its Zacks Consensus Estimate for the current-year earnings has moved slightly higher over the last 60 days. The stock carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

BOK Financial currently has a Zacks Rank of 2. Its shares have gained 14.7% in the past year. Its Zacks Consensus Estimate for the current year has been revised nearly 1% upward over the last 60 days.

Community Bank’s shares have gained 13.6% over the past 12 months. The Zacks Consensus Estimate for the current-year earnings has climbed 1% upward over the last 60 days. It also has a Zacks Rank of 2.

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