Ally Financial To Buy Back $1.6B In Stock

Ally Financial announced a stock repurchase program of up to $1.6 billion, sending shares of the bank holding company up 4.3% in Tuesday’s extended trading session.

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Ally Financial’s (ALLY) announcement comes after the Federal Reserve Board (FRB) released a stress test report in December 2020, which allowed financial services companies to repurchase shares and pay dividends in the first quarter of fiscal 2021, subject to certain restrictions.

Ally’s CEO Jeffrey J. Brown said, “The results of the Federal Reserve’s stress test reflect the strength of Ally’s balance sheet and capital position, allowing us to resume our share repurchase program, an important component of Ally’s capital allocation framework.” (See ALLY stock analysis on TipRanks)

In addition to the buyback plan, the company’s board has also announced a quarterly cash dividend of $0.19 per share, which will be paid by Feb. 12 to stockholders of record as of Feb. 1. It implies an annual dividend of $0.76 per share now reflects a dividend yield of 1.98%.

On Jan. 7, Jefferies analyst John Hecht raised the stock’s price target to $44 (14.7% upside potential) from $36 and maintained a Buy rating. The analyst said, “For 2021, we see a dichotomy of factors, with volumes positively impacted by a re-opening of the economy, an NCO cycle in midyear as stimulus fades, and a normalization of residual values as new car sales accelerate.”

The rest of the Street is also bullish on the stock, with a Strong Buy analyst consensus based on 8 unanimous Buys. The average analyst price target of $41.86 implies upside potential of about 9.1% to current levels. Shares have gained about 32.4% over the past year.

Furthermore, the stock scores a “Perfect 10” from TipRanks’ smart score rating system.