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Popular (BPOP) Stock up on Accelerated Share Repurchase Plan

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Popular, Inc. (BPOP - Free Report) entered an accelerated share repurchase agreement or ASR on Feb 28, 2022, to repurchase an aggregate of $400 million of the company’s common stock. This is part of the company’s plans to repurchase up to $500 million of its common stock as part of its planned capital actions for the ongoing year, as underlined in January.

Since the announcement, shares of the company have gained 5.2%.

Per the ASR Agreement, on Mar 2, 2022, Popular is expected to have made an initial payment of $400 million to receive an initial delivery of 3,483,942 shares of its common stock. This will be accounted as a treasury stock transaction.

Consequently, BPOP is expected to recognize around $320 million in treasury stock and $80 million as a reduction of capital surplus in its shareholders’ equity. Further adjustments in its treasury stock and capital surplus accounts will be made upon the final settlement of the ASR agreement to reflect the final delivery or receipt of cash or shares. This final settlement is expected to occur no later than third-quarter 2022.

The remaining $100 million in common stock repurchases are anticipated to be executed in the remainder of the year through the open market or in privately negotiated transactions.

Share buybacks aside, the company has been focused on rewarding shareholders through dividend hikes. Last week, it hiked quarterly cash dividends to 55 cents per share, reflecting a rise of 25% from the prior payout. The dividend will be paid out on Apr 1 to shareholders of record as of Mar 15.

This marks the fourth consecutive annual dividend hike by the company. Prior to this, Popular hiked its dividend by 12.5% to 45 cents per share in May 2021. We believe that such disbursements highlight the company’s operational strength and commitment toward enhancing shareholder wealth.

Popular witnessed earnings growth of 32.3% in the past three to five years, higher than the industry average of 14.2%. Though earnings are expected to decline 17.8% this year, the same is expected to bounce back and grow 5.1% in 2023.

Popular boasts a solid balance sheet. As of Dec 31, 2021, the company had total debt worth $1.06 billion and cash and cash equivalents of $428.4 million. Of the total debt, only $0.8 million is short-term in nature. Thus, given a robust liquidity position and decent earnings strength, the company’s capital deployment activities are likely to remain sustainable.

Shares of this Zacks Rank #1 (Strong Buy) bank have rallied 22.6% over the past six months, outperforming the industry’s 10.6% rise. You can see the complete list of today’s Zacks #1 Rank stocks here.

 

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Other Finance Companies Taking Similar Steps

Over the past few months, several companies have rewarded their shareholders with share buybacks. Some of these are WesBanco, Inc.  (WSBC - Free Report) and Evercore (EVR - Free Report) .

WesBanco announced that its board of directors authorized the extension of the stock repurchase program of up to additional 3.2 million shares.

WSBC’s buyback plan, originally announced in August 2021 (additional authorized repurchase of up to 3.2 million shares), has 0.2 million shares remaining under the authorization. As of Dec 31, 2021, the two buybacks combined represent 5.4% of the shares outstanding. The program does not have an expiration date.

Evercore announced that its board of directors approved share repurchases of up to the lesser of $1.4 billion or 10 million shares of Evercore’s Class A common stock and/or Evercore LP Units.

The authorization underlines Evercore’s ongoing commitment to rewarding shareholders and aligns with its capital return objectives. The company aims to offset dilution related to annual bonus equity and new hire grants through share repurchases and return excess cash that is not reinvested in the business through share buybacks.In 2019, 2020 and 2021, EVR repurchased shares worth $283 million, $147 million and $721 million, respectively.


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