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Synchrony Financial (SYF) Ups Buyback to Add Shareholder Value

Synchrony Financial's (SYF) new stock buyback program suggests its commitment toward delivering a long-term shareholder value and reflects the firm's confidence in its financial position.

This story originally appeared on Zacks

To enhance shareholder value, Synchrony Financial’s SYF board of directors recently authorized an increase of $1 billion to the existing share repurchase plan. SYF had $1.2 billion left under its prior authorization as of Sep 30, 2021, which brings the total amount to $2.2 billion. The new plan is applicable through the period ending Jun 30, 2022.

The leading financial transaction services company boasts of an impressive history when it comes to rewarding its shareholders via share buybacks. Time and again, SYF keeps enhancing its buyback authority. In May this year, SYF announced that its board of directors sanctioned a share repurchase program of up to $2.9 billion through Jun 2022. In 2020, SYF returned $1.5 billion to its shareholders despite the COVID-19 situation.

SYF returned $1.4 billion worth of capital during the third quarter. Share buybacks and dividend hikes are a prudent way to maximize shareholders’ wealth and generate more value.

Several other enhancements have also been made over the past few years.

Continued share buybacks clearly hint at SYF’s sound capital position despite the ongoing coronavirus crisis, which compelled most companies to temporarily suspend their share buyback programs. Repurchases are also likely to provide a boost to its bottom line.

Not only share buybacks, Synchrony Financial also remains committed to boosting its shareholder value via dividend hikes. This currently Zacks Rank #3 (Hold) financial miscellaneous services provider is paying out dividends to its shareholders, consistently. It intends to maintain the quarterly cash dividend of 22 cents per share. Its dividend yield stands at 1.9X, higher than the industry’s average of 1.7X.

These initiatives highlight the operational and financial strength of Synchrony Financial. SYF’s management remains optimistic about rewarding its shareholders with buybacks.

A robust financial position, driven by a strong balance sheet, paved the way for Synchrony Financial to undertake growth initiatives, and pursue accelerated and prudent capital-deployment measures.

SYF’s balance sheet was consistently strong during the last reported quarter with total liquidity of $18.4 billion (with $16.3 billion of liquid assets), which equated to 20% of its total assets. This recent move further reinforces Synchrony Financial’s sound financial prospects.

Also, its return on equity — a profitability measure to adjudge SYFl’s efficiency in utilizing its shareholders’ funds — is 30.7%, better than the industry average of 22.3%.

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Price Performance

Shares of Synchrony Financial have soared a whopping 47.2% in a year’s time compared with the industry’s rally of 16%. Moreover, several factors, such as its capital position, restructuring initiatives and solid Retail Card and CareCredit platforms will likely sustain the stock upsurge going forward.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks Investment ResearchImage Source: Zacks Investment Research

Stocks to Consider

Some better-ranked players in the finance sector are Moody's Corporation MCO, Blackstone Inc. BX and Houlihan Lokey, Inc. HLI. While BX sports a Zacks Rank #1, MCO and HLI hold a Zacks Rank #2 (Buy) at present.

Moody’s is a leading provider of credit ratings, research, data & analytical tools, software solutions & related risk management services, quantitative credit assessment services, etc. Over the past 30 days, MCO has witnessed its 2021 earnings estimate move 0.6% north. Its 2021 earnings estimate indicates an upside of 20.89%. MCO’s bottom line managed to deliver a trailing four-quarter surprise of 16.34%, on average.

Headquartered in New York, Blackstone is well poised to benefit from its fund-raising ability, revenue mix and inorganic expansion strategies. BX’s 2021 earnings are expected to rise 64.2% to $4.35 per share. BX has witnessed two upward estimate revisions in the past 30 days against none in the opposite direction. BX’s bottom line beat earnings estimates in all the last four quarters, the average being 23.7%.

Houlihan Lokey, headquartered in Los Angeles, CA, provides multiple financial services to clients worldwide. HLI’s growing footprint in Europe and Asia’s investment banking services field will help it boost strategic and shareholder value in the coming days. The fiscal 2022 bottom line of HLI is expected to rise 36.8% to $6.32 per share from the year-ago reported figure. In the past 30 days, HLI has witnessed four upward estimate revisions while there was no downward movement. HLI’s earnings beat estimates in all the last four quarters, the average being 39.5%.

Shares of MCO, BX and HLI have gained 41.4%, 90% and 48.9%, respectively in the past year.

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