Chuck's Cheese Shared at Schwab

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A recent windfall at Charles Schwab (Nasdaq: SCHW) will trickle all the way down to shareholders' pockets. The leading discount stock broker saw its shares climb 7% yesterday after announcing a massive buyback and a special one-time dividend.

Why is Schwab feeling so generous at the moment? It just completed the sale of its U.S. Trust wealth management business to Bank of America (NYSE: BAC) over the weekend. Fortified with after-tax proceeds of $2.7 billion, the company is issuing a special $1-per-share dividend and kicking off a $2.3 billion repurchase program.

The buyback will take the form of a Dutch auction, with interested investors tendering their shares at a price between $19.50 and $22.50 per share. The broker will then buy back the 84 million shares offered at the lowest prices (though all shares will be cashed out at the highest of the qualifying offers).

Sure, there was chatter about Schwab using some of that money to make a meaty acquisition. Rivals TD AMERITRADE (Nasdaq: AMTD) and E*Trade (NYSE: ETFC) are itching to consolidate, leading me to wonder whether this will all ultimately lead to one giant discount broker called E*AmeriSchwab. 

For now, it seems Schwab is content to keep its shareholders fed. The dividend will create healthy pocket change, while the share repurchase cashes out jittery stockholders. Now Schwab needs to earn the buyback. A successful tender offer will make earnings go farther, since they'll be divided among fewer shares.

If that's the ultimate prize, I'll take it. E*AmeriSchwab can wait.

More financial Foolishness:

• Welcome to E*AmeriSchwab
• Make the Most of Your Brokerage
• The Battle of the Brokers

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Longtime Fool contributor Rick Munarriz has been trading exclusively through discount brokers since 1990 but he does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.