Discover Financial Services To Buy Back $1.1B In Stock


Discover Financial Services announced a new stock repurchase program of up to $1.1 billion. The financial services company had suspended its buyback program since March 2020 amid the coronavirus pandemic.

The reinstatement of the repurchase plan came ahead of the company’s 4Q quarterly results, which are scheduled to be released on Jan. 20 after the market bell.

Discover Financial Services (DFS) said that the new share buyback program is valid until Dec. 31, 2021. However, it can be terminated at any time.

In addition to the repurchase program, the company’s board announced a quarterly cash dividend of $0.44 per share, which will be paid on March 4 to stockholders of record as of Feb. 18. (See DFS stock analysis on TipRanks)

Its quarterly dividend of $0.44 a share translates into an annual dividend of $1.76 per share, implying a dividend yield of about 1.8%.

On Jan. 19, J.P. Morgan analyst Richard Shane raised the stock’s price target to $114 (15.1% upside potential) from $72 and maintained a Buy rating. In a note to investors, Shane said that he is “increasingly constructive” on consumer finance this year and expects multiple expansion for the group in 2021.

Furthermore, Shane remains optimistic about the group’s earnings prospects and expects the company to return a significant amount of capital to its shareholders.

From the rest of the Street, the stock scores a cautiously optimistic outlook with the analyst consensus of a Moderate Buy based on 6 Buys and 9 Holds. The average analyst price target of $93.29 implies downside potential of about 5.8% to current levels. Shares have gained about 21.1% in one year.

Meanwhile, TipRanks’ stock sentiment tool shows that investors currently have a Negative stance on DFS.

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