Capital One
COF
has been meaningfully deploying capital to enhance shareholders’ value. In sync with this, the company announced additional share repurchase authorization worth $5 billion, effective from third-quarter 2022.
The authorization is in addition to the $5 billion buyback plan for this year, which was announced this January. Capital One repurchased shares worth $7.5 million in 2021.
It must be noted that the pandemic had severely curtailed Capital One’s efforts to enhance shareholder value through buybacks and dividend payouts. In 2020, the Federal Reserve restricted capital distribution for major financial companies, including Capital One,
JPMorgan
JPM
,
Bank of America
BAC
and
Goldman Sachs
GS
in order to preserve liquidity amid coronavirus-related ambiguity.
The central bank suspended share buybacks and capped dividend payments in a way that the companies can either pay a dividend equal to the amount paid in the second quarter of 2020 or according to a formula based on the recent income.
Based on these requirements, JPMorgan, Bank of America and Goldman continued to pay the same amount of quarterly dividend as they had paid out for the second quarter of 2020. Capital One had to slash its quarterly dividend payout by 75% to 10 cents per share for the third and fourth quarters of 2020.
Nonetheless, since then, COF restored the dividend to 40 cents per share for the first quarter of 2021 and hiked it by 50% in July 2021. It also announced a special dividend of 60 cents per share (the difference between its historical 40 cents per share dividend and the reduced level for the last two quarters of 2020) last year.
Now, COF pays 60 cents per share as quarterly dividend. Based on the last day’s closing price of $129.28, the dividend currently yields 1.86%. Not only is the yield attractive for income investors, but also it represents a steady income stream.
Given a robust liquidity position and decent earnings strength, COF is expected to continue with efficient capital deployment activities.
Over the past six months, shares of Capital One have lost 23.4% compared with an 18.2% fall for the
industry
it belongs to.
Image Source: Zacks Investment Research
COF currently carries a Zacks Rank #3 (Hold). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers “Most Likely for Early Price Pops.”
Since 1988, the full list has beaten the market more than 2X over with an average gain of +25.4% per year. So be sure to give these hand-picked 7 your immediate attention.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
