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Key Takeaways from State Street's 3Q17 Earnings

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Part 4
Key Takeaways from State Street's 3Q17 Earnings PART 4 OF 8

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.

Understanding State Street’s Dividends and Repurchases

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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.

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