A Key to Investing in the Regional Bank KeyCorp

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Part 8
A Key to Investing in the Regional Bank KeyCorp PART 8 OF 10

KeyCorp Offers High Total Capital Payout


KeyCorp’s (KEY) dividend payout ratio for 2014 was 24.8%. The ratio has steadily increased over the last five years. The dividends paid by most US banks fell to near zero levels during and after the economic crisis. As the banks are recovering, they are steadily increasing dividends as well.

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Share repurchases

KeyCorp also repurchased ~36 million shares of common stock, amounting to ~4% of total shares outstanding, for $496 million during 2014. While share repurchase is an alternative way of returning capital to shareholders, companies also do it to improve returns on equity and earnings per share by reducing the denominator.

Total capital payout ratio is defined as dividends plus share repurchases divided by adjusted net income available to common shareholders. KeyCorp’s 2014 total shareholder capital payout of 82% is one of the highest among its peer group.

A very high payout ratio might indicate that the company doesn’t have better investment options for its funds. The above chart shows KeyCorp’s capital priorities and its 2014 capital payouts through dividends and stock repurchases.

Low dividend yield

Dividend yield is a company’s annual dividend per share expressed as a percentage of its share price. KeyCorp’s dividend yield is one of the lowest among its peers, including BB&T (BBT), Fifth Third Bancorp (FITB), U.S. Bancorp (USB), and PNC Financial Services (PNC). Dividend yields are important if you’re looking for a regular stream of income from your portfolio.

KeyCorp’s low yield might indicate that the stock is slightly overvalued. The higher stock price might also be in anticipation of a dividend increase. KeyCorp announced a dividend increase in March 2015 after the Federal Reserve approved its 2015 capital plans.

KeyCorp forms ~1.66% of the SPDR S&P Bank ETF (KBE) and ~3.1% of the iShares U.S. Regional Banks ETF (IAT).


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