Digital financial services company Ally Financial (ALLY) announced that its board of directors have approved a new common stock repurchase program and declared a 32% hike in quarterly dividend from the prior payout.
The recently announced share repurchase program replaces the $1.6 billion authorization announced on January 12, 2021.
The buyback plan has to be carried out in 2021 and the repurchases will be carried out as and when determined by Ally Financial in the open market or private transactions.
Further, a quarterly cash dividend of $0.25 per share is payable on August 16 to stockholders of record on August 2, 2021. Prior to this, the company had increased its dividend by 11.8% in January 2020. (See Ally Financial stock chart on TipRanks)
CEO of Ally Financial Jeffrey J. Brown said, “Our capital deployment priorities remain centered around investing in growth opportunities across our businesses, aimed at delivering innovative and differentiated products for our customers while prudently returning excess capital to our shareholders.”
Last month, Jefferies analyst John Hecht reiterated a Buy rating on the stock and raised the price target to $60 from $58 (16.7% upside potential from current levels).
Hecht is of the opinion that Ally Financial remains a top pick among auto lenders. He said, “Supportive trends for auto lenders should persist in Q2, with strong credit quality, elevated residual values and strong used-car volumes.”
On these factors, the analyst feels that Q2 2021 will likely be another strong quarter. He added, “However, we note that fleet sales have slowed recently as used car values, which have been very supportive of strong results, have begun to taper. Thus, 2H21 may not be as easy as 1H21.”
The rest of the Street is optimistic about the stock with a Strong Buy consensus rating based on 7 unanimous Buys. The average Ally Financial price target of $60.29 implies 17.3% upside potential from current levels.
According to TipRanks’ Smart Score system, Ally Financial scores a “Perfect 10,” which indicates that the stock has strong potential to outperform market averages.
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