Morgan Stanley Doubles Quarterly Dividend; Increases Share Buyback to $12B

Global financial services firm Morgan Stanley (MS) announced that it will double quarterly cash dividends to $0.70 per share in the third quarter of 2021. Additionally, the Board has also authorized share repurchase of up to $12 billion over the next 12 months. Shares are trading 2.51% higher at the time of writing. (See Morgan Stanley stock chart on TipRanks)

The company’s annualized dividend has now increased to $2.80 per share, reflecting a dividend yield of 3.2%.

James P. Gorman, Chairman, and CEO of Morgan Stanley said, “Morgan Stanley has accumulated significant excess capital over the past several years and now has one of the largest capital buffers in the industry. The action taken by the Board reflects a decision to reset our capital base consistent with the needs we have for our transformed business model. In particular, Wealth Management and Investment Management provide stable and durable earnings that support a significantly higher payout ratio. Going forward, we remain amply capitalized to drive further growth.”

The Federal Reserve released the latest stress test results on June 24; accordingly, Morgan Stanley will have to maintain a Stress Capital Buffer (SCB) of 5.7% from October 1, 2021, through September 30, 2022.

J.P. Morgan analyst Kian Abouhoussein recently maintained a Buy rating on the stock and lifted the price target to $105 (19.7% upside potential) from $85.

Abouhoussein believes that the investment banking industry is “well-positioned for undiscounted growth” with its transformation into lower capital-intensive business, focus on captive sustainable revenue streams, and higher barriers of entry. This should enable “Tier I” investment banking companies to earn a higher price-to-earnings multiple on both absolute and relative terms when compared to their retail banking counterparts.

Based on 13 Buys and 3 Holds, the stock has a Strong Buy consensus rating with an average Morgan Stanley price target of $97.20, implying 10.8% upside potential from current levels. Shares gained 92.9% over the past year.

Also, Morgan Stanley scores a “Perfect 10” from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.