What happened
Shares of Morgan Stanley (MS 0.55%) traded nearly 5% higher when the market opened today after the bank announced yesterday that it plans to increase its quarterly dividend and also authorized a new share repurchase program. As of 11:18 a.m. ET today, shares had fallen back and only traded more than 2% higher.
So what
Morgan Stanley said it plans to increase its quarterly dividend to nearly $0.78 per share in the third quarter from the current quarterly dividend of $0.70 per share, representing a nearly 11% increase. With the increase, it would have an annual dividend yield of roughly 3.9% with shares currently trading around $80, which is very strong.
The bank also said that its board of directors has authorized a new multiyear share repurchase program of as much as $20 billion. The plan will begin in the third quarter and does not currently have an expiration date. With its market cap of nearly $140 billion, buying back the full $20 billion would represent more than 14% of the bank's total market capitalization.
"We are pleased to continue our robust capital return program, which is driven by our business transformation, especially the durable earnings from our Wealth Management and Investment Management businesses," CEO James Gorman said in an earnings statement.
Now what
Morgan Stanley just raised its dividend after doubling it last year and continues to repurchase shares, making the stock of great value from a capital return standpoint.
Furthermore, it has really transformed its business after the big acquisitions of E*Trade and Eaton Vance in recent years. The bank has a long-term goal of delivering a 20% return on tangible common equity, which is more than its other large bank peers. I would rate the stock as a buy.
