Understanding State Street’s Dividends and Repurchases
Comprehensive capital analysis and review
In June 2017, State Street (STT) published a press release, stating that the Fed has made no objections to its capital plan. Under the plan, the company included its new purchase program and its proposed rise in dividends.
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State Street has proposed to increase its distribution per share to $0.42. As a result, it declared a quarterly distribution per share of $0.42 on July 20, 2017. It paid this quarterly distribution on October 16, 2017.
State Street has reported an operating margin of 26.0% on a trailing 12-month (or TTM) basis. Its peers (XLF) the Bank of New York Mellon (BK), GAIN Capital Holdings (GCAP), and JPMorgan Chase (JPM) posted operating margins of 33.8%, 4.1%, and 38.7%, respectively, on a TTM basis.
New purchase program
State Street’s proposed capital plan also included a new purchase program that allows the company to make a purchase of common stocks at a maximum of $1.4 billion.
According to top management, rewarding shareholders is crucial, and thus the company made a purchase of common stocks of $350 million in 3Q17.
However, State Street saw a decline in its payout ratio in 3Q17 compared to 3Q16. In 3Q17, its payout ratio was 24.8%, while in 3Q16 it was 28.9%, reflecting a decline of 410 basis points.