Capital One Puts $500 Million Back In Its Wallet
- March 9, 2009
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Capital One Financial (COF: 40.84 -2.95%) announced that they are slashing their quarterly dividend by 87% to $.05 per share. The dividend cut will allow the company to save over $500 million.
The dividend cut will reduce the company’s dividend yield to 2.4%.
“We’re moving today to reduce future dividends because in today’s unprecedented economic and market conditions, our highest priority is managing our balance sheet to maintain its considerable strength and resilience,” said Richard D. Fairbank, Capital One’s Chairman and Chief Executive Officer. “In addition, our ongoing dialogue with investors indicates that they value strong capital positions over dividend streams at this point in the cycle. Today’s announced action is one of the most efficient ways to support capital levels in the current environment. The capital we preserve through the reduced dividend will reinforce our already-strong capital position, increase our flexibility to manage through the downturn, and enhance our ability to repay the U.S. Treasury Department’s preferred stock investment as soon as it is prudent and appropriate to do so. When the economy recovers, we expect that returning capital to shareholders will once again be a key part of how we deliver value over the long-term.”
Wall Street cheered the news, sending shares up 12.8% to $9.37 in early morning trading. Since the beginning of the year, Capital One’s shares have been battered – falling 74% after dropping 33% in 2008.
