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Raymond James (RJF) Announces Enhanced Capital Deployment Plan

Raymond James Financial, Inc.  RJF intends to reward its shareholders through stock dividend. The bank’s board of directors approved a three-for-two stock split, which will be in the form of a 50% stock dividend on its outstanding shares, payable Sep 21, 2021 to its shareholders of record on Sep 9, 2021.

Each shareholder of Raymond James will receive one additional share for every two shares held on record as of Sep 9, 2021. The shares will be distributed in the beginning of business on Sep 21, 2021. The company also noted that cash will be distributed in lieu of fractional shares based on the closing price on the NYSE on Sep 20, 2021.

Stock split increases the number of outstanding shares of a company without changing its market capitalization. A higher number of shares outstanding reflect lower stock price, thus making it affordable for shareholders.

Raymond James also pays regular quarterly dividend. On Aug 24, 2021, the company had announced a quarterly dividend on shares of its post-split common stock of 26 cents per share, which was economically equivalent to the pre-split amount of 39 cents paid out in the preceding quarter. The dividend will be paid out on Oct 15, 2021 to its shareholders of record on Oct 1, 2021.

The last dividend hike of 5.4% was announced in December 2020. Even though in mid-March 2020, the company suspended share buybacks with an aim to conserve liquidity, it resumed the same in fourth-quarter fiscal 2020. As of Jul 28, 2021, an amount worth $632 million remained available under the buyback authorization. Based on the last-day closing price of $140.16 per share, the dividend yield is currently 0.74%.

The chairman and CEO of the firm, Paul Reilly said, “These actions reflect our continued confidence in the long-term outlook for Raymond James.”

In the recently reported quarter, the company’s results displayed an impressive Capital Markets and Asset Management segment’s performance, which majorly drove revenues. Rise in assets balance, provision benefit and a strong balance sheet position were the other tailwinds. However, higher operating expenses posed an undermining factor.

Supported by its earnings strength, Raymond James is expected to continue with its efficient capital deployment activities. Through this, it will keep enhancing its shareholder value. However, low interest rates and the company's high dependence on the volatile nature of the capital markets to generate investment banking revenues make us apprehensive.

Over the past six months, shares of Raymond James have gained 15.8%, outperforming 15.2% growth of its industry.

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As investors are always on the lookout for companies with a track record of consistent and incremental dividend payments to bet their money on, solid dividend payouts are therefore arguably the biggest bait to lure investors. Such strategic moves also boost investors’ confidence in the stock and will likely bump up the company’s shares in the upcoming period.

Currently, Raymond James carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Competitive Landscape

In the past few months, several finance companies have raised their quarterly dividends.

Bank OZK  OZK hiked its quarterly dividend by 1.8% to 28.5 cents per share while  Associated Banc-Corp  ASB announced a dividend of 20 cents per share, representing an increase of 11.1% from the prior payout.

Bank of America  BAC also raised its dividend by 17% to 21 cents per share.

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