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Will Dividend Appeal Give U.S. Bancorp (USB) Stock a Boost?
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U.S. Bancorp (USB - Free Report) recently announced a 7.1% hike in its quarterly common stock dividend. The new dividend of 30 cents is scheduled to be paid on Oct 16 to its shareholders on record as of Sep 29. Based on the last day’s closing price of $53.16 per share, the dividend yield is 2.26%.
This dividend hike is in line with its 2017 capital plan, which also includes a share repurchase program of up to $2.6 billion for a four-quarter period beginning Jul 1, 2017.
But would this dividend hike be able to give the stock a boost?
Growth Drivers
The company’s liquidity position can be judged from its rising loans and deposits. Over the last five years (ended 2016), loans and deposits have witnessed a compound annual growth rate (CAGR) of 5.6% and 7.3%, respectively.
Further, U.S. Bancorp’s return on equity indicates that it utilizes shareholders’ funds better than the industry.
Also, the company’s earnings per share (EPS) have increased 3.14% over the last three to five years. The trend is expected to continue in the near term as well. U.S. Bancorp’s projected EPS growth is 6.43% and 9.35% for 2017 and 2018, respectively.
Moreover, U.S. Bancorp’s leverage picture looks encouraging. Its debt/equity ratio of 0.87 compares with 0.88 for the broader industry.
Concerns
U.S. Bancorp’s revenues have seen a four-year (ended 2016) CAGR of 2.8%. Given its diverse revenue sources, the growth does not look encouraging.
Additionally, the stock looks overvalued based on its price-to-book and price-earnings (F1) ratios, which are above the respective industry averages.
In fact the stock has a Value Style Score of C. 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 Style Scores of A or B, when combined with Zacks Rank of #1 (Strong Buy) or 2 (Buy), offer the best upside potential. You can see the complete list of today’s Zacks #1 Rank stocks here.
Our Viewpoint
U.S. Bancorp’s growth prospects look encouraging based on its healthy balance sheet growth and lower debt burden. Further, projected increase in EPS is also encouraging.
However, the stretched valuation limits the stock’s upside potential. Also, the company has not been able to gain analysts’ confidence, as indicated by a stable Zacks Consensus Estimate for current-year earnings over the past 30 days. Thus, the stock currently carries a Zacks Rank #3 (Hold).
Shares of U.S. Bancorp have gained 3.5% year to date, underperforming the 7.2% rally of the industry it belongs to.
Stocks to Consider
Some better-ranked stocks in the same space are PNC Financial Services Group (PNC - Free Report) , State Street Corporation (STT - Free Report) and M&T Bank Corporation (MTB - Free Report) . All these stocks carry a Zacks Rank of 2.
PNC Financial’s Zacks Consensus Estimate for current-year earnings was revised slightly upward for 2017, in the past 60 days. Also, its share price has increased 44.7% in the past 12 months.
State Street’s current-year earnings estimates were revised 3.6% upward, over the past 60 days. Further, the company’s shares have gained 34.6% in a year.
M&T Bank’s Zacks Consensus Estimate for current-year earnings was revised slightly upward, over the last 60 days. Moreover, in the past year, its shares have gained 32%.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
Will Dividend Appeal Give U.S. Bancorp (USB) Stock a Boost?
U.S. Bancorp (USB - Free Report) recently announced a 7.1% hike in its quarterly common stock dividend. The new dividend of 30 cents is scheduled to be paid on Oct 16 to its shareholders on record as of Sep 29. Based on the last day’s closing price of $53.16 per share, the dividend yield is 2.26%.
This dividend hike is in line with its 2017 capital plan, which also includes a share repurchase program of up to $2.6 billion for a four-quarter period beginning Jul 1, 2017.
But would this dividend hike be able to give the stock a boost?
Growth Drivers
The company’s liquidity position can be judged from its rising loans and deposits. Over the last five years (ended 2016), loans and deposits have witnessed a compound annual growth rate (CAGR) of 5.6% and 7.3%, respectively.
Further, U.S. Bancorp’s return on equity indicates that it utilizes shareholders’ funds better than the industry.
Also, the company’s earnings per share (EPS) have increased 3.14% over the last three to five years. The trend is expected to continue in the near term as well. U.S. Bancorp’s projected EPS growth is 6.43% and 9.35% for 2017 and 2018, respectively.
Moreover, U.S. Bancorp’s leverage picture looks encouraging. Its debt/equity ratio of 0.87 compares with 0.88 for the broader industry.
Concerns
U.S. Bancorp’s revenues have seen a four-year (ended 2016) CAGR of 2.8%. Given its diverse revenue sources, the growth does not look encouraging.
Additionally, the stock looks overvalued based on its price-to-book and price-earnings (F1) ratios, which are above the respective industry averages.
In fact the stock has a Value Style Score of C. 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 Style Scores of A or B, when combined with Zacks Rank of #1 (Strong Buy) or 2 (Buy), offer the best upside potential. You can see the complete list of today’s Zacks #1 Rank stocks here.
Our Viewpoint
U.S. Bancorp’s growth prospects look encouraging based on its healthy balance sheet growth and lower debt burden. Further, projected increase in EPS is also encouraging.
However, the stretched valuation limits the stock’s upside potential. Also, the company has not been able to gain analysts’ confidence, as indicated by a stable Zacks Consensus Estimate for current-year earnings over the past 30 days. Thus, the stock currently carries a Zacks Rank #3 (Hold).
Shares of U.S. Bancorp have gained 3.5% year to date, underperforming the 7.2% rally of the industry it belongs to.
Stocks to Consider
Some better-ranked stocks in the same space are PNC Financial Services Group (PNC - Free Report) , State Street Corporation (STT - Free Report) and M&T Bank Corporation (MTB - Free Report) . All these stocks carry a Zacks Rank of 2.
PNC Financial’s Zacks Consensus Estimate for current-year earnings was revised slightly upward for 2017, in the past 60 days. Also, its share price has increased 44.7% in the past 12 months.
State Street’s current-year earnings estimates were revised 3.6% upward, over the past 60 days. Further, the company’s shares have gained 34.6% in a year.
M&T Bank’s Zacks Consensus Estimate for current-year earnings was revised slightly upward, over the last 60 days. Moreover, in the past year, its shares have gained 32%.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>