US Bancorp Stops for No One

03/15/2012 5:09 pm EST

Focus: FINANCIALS

Jim Jubak

Founder and Editor, JubakPicks.com

The bank had an aggressive dividend and buyback plan ready to go almost immediately after it passed the Fed stress test, which augurs well for continued success, writes MoneyShow's Jim Jubak, also of Jubak's Picks.

That didn’t take long.

Hours after the Federal Reserve announced on March 13 that US Bancorp (USB) was one of the 15 financial companies that had passed its annual stress test (for more on the stress test and winners and losers, see my post)—and could therefore go ahead with its plans to raise dividends and increase its buyback program—the Minnesota-based bank did exactly that.

The board of directors approved a 56% increase in dividends, to a quarterly 19.5 cents a share, payable on April 16 to shareholders of record on March 30. (US Bancorp is a member of my Jubak’s Picks portfolio.)

The board of directors also authorized a new stock buyback plan of up to 100 million shares through March 2013. (The bank has 1.91 billion shares outstanding at present.)

The new annual dividend of 78 cents a share takes the yield on US Bancorp shares up to 2.46%, from the current 1.61%, at today’s closing price of $31.68.

I added this stock to Jubak's Picks on March 26, 2010, in anticipation that the bank would work to restore its pre-Lehman payout level, and that the bank was in a strong capital position that would allow it to pick up market share in its core businesses.

I think that thesis still has a way to run. I’d raise my target price on these shares, currently at $33, to $35 by October 2012.

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund, may or may not now own positions in any stock mentioned in this post. The fund did own shares of US Bancorp as of the end of December. For a full list of the stocks in the fund as of the end of December, see the fund’s portfolio here.

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