BB&T Corporation Rewards Shareholders with 11% Quarterly Dividend Hike (NYSE:BBT)
By: Ned Piplovic,
The BB&T Corporation (NYSE:BBT) rewarded its shareholders with a ninth consecutive dividend hike by boosting its upcoming quarterly dividend payout amount 11% for the upcoming round of dividend distributions next month.
Aside from cutting its quarterly dividend once for the third quarter of 2009 during the financial crisis, the BB&T Corporation boosted its annual dividend every year over the past two decades. Furthermore, in 2018, the bank also delivered to its shareholders a second dividend hike and a special dividend. The share price stumbled a bit and has traded relatively flat over the trailing 12 months. Additionally, amid the current market selloff over the past couple of days, the share price declined by a single-digit percentage. This share price decline overpowered the above-average dividend income payouts to deliver a small overall loss for the past year.
However, the banks fundamentals are strong, and the share price should rebound as soon as the downward pressure from the overall market decline subsides. Furthermore, the upcoming merger of equals with SunTrust Banks Inc. (NYSE:STI) will create the sixth larges U.S. bank in terms of assets and deposits, which will create additional market strength for further expansion. Additionally, the two banks estimate nearly $1.6 billion in cost savings from merger synergies. These cost savings and larger market shares should form a solid foundation for continued share price growth and continuation of the dividend hike streak under the new corporate identity — Truist Financial Corporation.
As always, interested investors should conduct their own stock analysis, especially considering the impending merger. However, if the merger is successful and the share price rebounds soon, the current pullback might be a great opportunity to take a long position at the current discount. However, investors whose analysis confirms that BB&T could be a good investment should consider acting before the upcoming August 13, 2019, ex-dividend date to lock in eligibility for the next round of dividend distributions. BB&T will distribute the next round of dividends to all shareholders of record on September 3, 2019.
BB&T Corporation (NYSE:BBT)
Based in Winston-Salem, North Carolina, and founded in 1872, the BB&T Corporation operates as a financial holding company for the BB&T Bank that provides various banking and trust services for small and mid-size businesses, public agencies, local governments and individuals. The bank operates through six business segments — Community Banking Retail & Consumer Finance, Financial Services & Commercial Finance, Community Banking Commercial and Insurance Holdings. In addition to the customary retail banking services, such as savings accounts, checking accounts and certificates of deposit, the BB&T Corporation also offers other financial and wealth-management services. The bank offers individual retirement accounts, as well as asset management, lending and consumer finance, as well as home equity and mortgage lending. Furthermore, the Insurance Holdings segment offers a variety of products, such as property and casualty, life, health, employee benefits, commercial general liability, surety, title and other insurance products. Additionally, BB&T provides investment brokerage, mobile and online banking, payment, lease financing, small business lending, as well as wealth management and private banking services.
The company’s current dividend hike increased the quarterly distribution 11.1% from $0.405 distributed in the second-quarter 2019 to the $0.45 upcoming payout amount. After this dividend hike and two boosts last year, the current $0.45 quarterly dividend payout amount is 36.3% higher than the $0.33 distribution at the beginning of 2018. BB&T Corporation’s upcoming quarterly payout of $0.45 corresponds to a $1.80 annualized dividend payout and a 3.8% forward dividend yield. The dividend hike streak and the recent share price dip pushed the current yield nearly 37% above the company’s own 2.8% average dividend yield over the past five years.
In addition to outperforming its own five-year yield average, BB&T’s current yield is also 27% higher than the 3% average yield of the overall Financials sector as well as more than double the 1.87% simple average yield of all the companies in the Mid-Atlantic Regional Banks industry segment. The segments average yield increases to 2.46% once we exclude the banks that currently do not distribute any dividends to their shareholders. Therefore, BB&T’s current yield also outperformed by 54% the simple yield average of only the segment’s dividend-paying equities.
The BB&T Corporation paid a flat $0.15 quarterly dividend for seven consecutive periods after cutting its 68% in the third quarter of 2009. However, the bank began its current streak of annual dividend increases with a dividend hike in the second-quarter 2011. Since the beginning of the current nine-year dividend hike streak in 2011, BB&T tripled its total annual dividend amount. This pace of advancement corresponds to an average growth rate of 13% per year for nearly a decade. Despite the dividend cut of nearly 70% in 2009, the company still managed to deliver an average annual growth rate of more than 4% over the past two decades.
BB&T’s current dividend payout ratio of 40% indicates that the company uses only a little more than a third of its earnings to cover divided distributions. This ratio is marginally lower than the company’s own 41% five-year payout ratio average. Additionally, BB&T’s current payout ratio is right in the middle of the 30% to 50% that is generally considered by investors as sustainable. At 40%, BB&T’s current payout ratio indicates that the company distributes a significant share of its earnings as dividend to attract income-seeking investors. Alternatively, the current payout ratio is low enough below the 50% upper limit to indicate that the company has enough earnings to cover the dividend distributions, as well as support future dividend increases.
Notwithstanding the steady streak of dividend boosts and double-digit growth rate, BB&T’s dividend income distributions were unable to overcome the current share price pullback of nearly 8%. However, the dividend income offset a portion of that decline and limited the total loss to less than 4.5% over the trailing 12 months. The longer-term total returns of 36% over the past three years and 48% over the past five years are more representative of the BB&T’s long-term performance.
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.