State Street’s 2019 Payout Of $2.3 Billion Comes Close To Record Level Seen In 2013

State Street (NYSE:STT) has announced plans to return $2.7 billion to its shareholders over the next twelve months after the latest round of the Fed’s annual stress test. Trefis has analyzed the trends in State Street’s dividend payouts and share repurchases over the last 5 years and has summarized our expectations for the next three. You can modify our forecasts to see the impact of changes on State Street’s share repurchase and dividends using our Interactive Dashboard, and also see more Trefis data for financial services companies here.

State Street’s 2019 Capital Return Plan

• Under the new plan, State Street will hike its quarterly dividends by 11% – from 47 cents now to 52 cents a share beginning Q3 2019. This works out to total dividends of ~$730 million assuming average outstanding shares of 350 million.
• The bank will also repurchase $2 billion worth of its common shares over the next twelve months – which is 67% more than the $1.2-billion share repurchase plan announced in 2018
• Taken together, this represents a total shareholder payout of $2.7 billion over the next twelve month.

The chart below details State Street’s total shareholder payouts for each year since 2013, and includes our forecast for the next three years.

Historical Payouts

• After the 2008 recession, State Street paid average annual dividends of $20 million to its common stockholders in 2009 and 2010.
• However, shareholder payout recovered in the subsequent years and averaged around $1.8 billion per year over 2011-18.
• Share repurchases and total payouts were considerably low in 2018 as the custody banking giant set aside cash to complete its $2.6-billion acquisition of Charles River.
• Quarterly dividends have gradually improved from 18 cents per share in 2011 to the current level of 47 cents per share and are should increase to 52 cents per share over Q3 2019 – Q2 2020.
• Over the last ten years, State Street has returned $14.5 billion in cash to common shareholders, an average of $1.5 billion a year – representing about 93% of its average retained earnings of $1.6 billion for this period.
• Notably, the bank has paid $4.2 billion in dividend and $10.3 billion in share buybacks over the last decade – preferring share repurchase to dividends as the primary method to return cash to the shareholders.

What To Expect In 2019

• We expect total dividends to be around $725 million, as the annual dividend per share will increase to $2.09 from $1.79 in 2019.
• Also, the bank repurchased $300 million in shares in Q1 2019 and is likely to have repurchased shares worth an additional $300 million in the second quarter (remaining share buyback out of $1.2 billion approved in the 2018 capital return plan).
• Taken together with $1 billion in proposed purchases for the rest of the year (half of the total proposed repurchases of $2 billion), total share repurchases are expected to be around $1.6 billion in 2019.
• The total payout for the year is, therefore, likely to be over $2.33 billion – which is 98% of our forecast for the bank’s net income of $2.38 billion and more than twice the total payout in 2018.

We factor in these payouts in our analysis of State Street in the form of an adjusted dividend payout rate (which is the total payout ratio), shown in the chart below.

Do not agree with our forecast? Create your own forecast for State Street by changing the base inputs (blue dots) on our interactive dashboard.

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