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Regions Financial Shareholders: Prepare for More Dividends

If more dividends and share buybacks were on the 2013 wish list for Regions Financials  (NYSE: RF  ) shareholders, then dreams are coming true.

In the release of the Dodd-Frank stress tests last week, we saw that Regions' financial position has improved markedly from last year. And last year, the bank's capital plans revolved around raising new cash through share sales so it could pay down its TARP investment. But the rubber was set to meet the road this week as the Fed was on tap to release whether Regions' 2013 capital plans -- which investors hoped included capital distributions -- were approved.

So I don't keep you in suspense: They were approved, and they did include notable capital distributions. 

Show me the dividends!
Since the financial crisis, Regions' dividend has been stalled out at the token rate of $0.01 per quarter. Following the latest stress-test results, that will be no more.

Source: Bank press release.

While the increase only brings Regions' dividend yield to 1.4% (based on today's stock price), it's a good deal better than what shareholders were getting before, and a positive sign for the future.

What else do I get?
It wasn't just dividends that the Fed gave Regions the go-ahead for; it also approved share buybacks for up to $350 million.

Source: Bank press release.

Notably, that only includes common share repurchases. The bank was also given approval to buy back up to $500 million of trust preferred securities.

While share buybacks can be an iffy proposition for shareholders if done at the wrong time, with Regions' stock trading at a discount to book value, it strikes me as a pretty advantageous time for the bank to be conducting buybacks.

Onward and upward?
Regions has made it onto my personal bank watchlist and may soon be part of my personal portfolio. While the bank took some serious lumps during the downturn, it appears to be putting that in the rear view and turning over a new leaf. Capital strength is only part of the picture for a bank like Regions, but it's an important one considering the trouble that banks got themselves into just five years ago.

To dig in further on the bank and look at some of the other factors that might make Regions a buy today, I invite you to read our premium research report on the company. Click here now for instant access.

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9/29/2016 4:01 PM
RF $9.67 Down -0.16 -1.63%
Regions Financial CAPS Rating: ****