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SunTrust Bank Has a Lower Dividend Yield

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Dividends and stock repurchases

SunTrust Bank (STI) paid common dividends totaling $371 million or $0.70 per share in 2014.

During the first quarter of 2014, SunTrust’s board approved the repurchase of up to $450 million of outstanding common stock between 2Q14 and 1Q15. Subject to new guidelines on the inclusion of share-based compensation in capital issuances, the company expects this figure to decrease by about $50 million.

During the second, third, and fourth quarters of 2014, STI repurchased $278 million of common stock under the 2014 plan. So far, the company has repurchased $50 million of stock during the first quarter of 2015. STI plans to repurchase an additional $60 million to $70 million of stock through the end of the first quarter of 2015, completing the repurchase in conjunction with the 2014 plan.

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Dividend yields

Dividend yield is a company’s annual dividend per share expressed as a percentage of its share price. SunTrust Bank has a lower dividend yield compared to BB&T (BBT) and a marginally higher one than Regions Financial (RF). Among STI’s peers, Fifth Third Bancorp (FITB) has the highest dividend yield. Together, these four banks form about 5.4% of the SPDR S&P Regional Banking ETF (KRE) and roughly 3.5% of the iShares US Financial Services ETF (IYG).

The graph above compares SunTrust’s dividend yield with those of its peers. Dividend yields are important if you are looking for a regular stream of income from your portfolio.

Capital payouts

SunTrust’s common dividend payout ratio for 2014 was 21.5%, while BB&T’s dividend payout was around 35%. Even though STI’s dividend payout ratio is low, its total payout, including share repurchases, is high. The bank’s total payout ratio for 2014 was 48%.

To calculate the total payout ratio, add the dividends to share repurchases and divide that figure by the adjusted net income that is available to common shareholders.

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