Discover Seeks Fed Approval for Buybacks, Dividend Increase; Company Plans to Increase Quarterly Dividend to 24 Cents and Repurchase up to $1.6 Billion in Stock
Discover Financial Services proposed a 20% increase to the credit-card company's dividend and up to $1.6 billion in stock buybacks over the next year, moves that would need approval from the Federal Reserve.</br></br>The announcement comes as the lender was among 29 of the 30 largest institutions that the Fed said have enough capital to continue lending even when faced with a hypothetical jolt to the U.S. economy lasting into 2015.</br></br>The so-called "stress test" is an annual test of big banks' financial health, and positive views can clear the way for the companies to reward investors with dividends and buybacks.</br></br>Discover on Thursday said its proposed actions include an increase to the company's next quarterly dividend to 24 cents a share from 20 cents previously. It also intends to repurchase up to $1.6 billion in stock during the next four quarters ended March 31.</br></br>The company said the actions would be subject to a "non-objection" from the Fed later this month, and the dividend increase will also need approval from Discover's board.