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State Street Hikes Dividend By 11.8%: Is It Worth a Buy?

Zacks

As expected by the market, State Street Corporation STT announced a hike in its quarterly cash dividend. This followed the approval of its 2016 capital plan by the Federal Reserve in June.

State Street declared a quarterly cash dividend of 38 cents per share, up 11.8% from the prior payout. The dividend will be paid on Oct 17, to shareholders of record as on Oct 3. Considering last day’s closing price of $69.29 per share, the dividend yield currently stands at 2.2%.

Additionally, State Street’s capital plan includes authorization to repurchase up to $1.4 billion worth of shares, through the second quarter of 2017.

Is State Street Worth Adding to Your Portfolio?


Are you contemplating investment in this value enhancing Zacks Rank #2 (Buy) stock? Before taking any investment decision, let’s have a look at State Street’s fundamentals and growth prospects.

Earnings Strength: State Street has witnessed earnings per share CAGR of 4.3% over the last five years (2011–2015).

Also, State Street’s earnings are projected to grow at the rate of 2.91% for 2016,as againsta decline rate of 0.76% for the industry. Further, earnings are anticipated to rise 10.31% year over year for 2017.

Revenue Growth: Organic growth remains solid at State Street. Revenues grew at a CAGR of 2% over the last five years (2011–2015). Further, top line is expected to grow at the rate of 2.54% in 2016 in the wake of continuous investment in new products, new business wins along with the acquisition of GE Asset Management.

Rising Expenses: Elevated operating expenses continue to be a concern for State Street. Operating expenses witnessed a 6-year (2010–2015) CAGR of 3.3%.Though expenses fell in the first half of 2016 driven by State Street Beacon initiative, they are anticipated to rise in the second half due to higher regulatory and compliance costs, other operating expenses, outside consulting expenses and expenses related to the installation of new business.

Price-to-Equity (P/E) Ratio: State Street’s P/E ratio stands at 13.77 compared with the industry average of 12.90, indicating that the stock is overpriced.

Leverage: State Street’s debt/equity ratio stands at 0.63 compared with the industry average of 0.93, indicating lower debt level relative to the industry.

Share Price Movement: Though the share price has declined 1.5% post the announcement of the dividend hike, State Street’s has witnessed an uptrend year-to-date, rising approximately 4.4%.

Further, the company has a Momentum Style Score of ‘A’.

Other Stocks Worth A Look

Some other favorably ranked stocks in the finance space include Apollo Global Management, LLC APO, Meta Financial Group, Inc. CASH and Barclays PLC BCS, each sporting a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

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