Signet plans to increase its dividend 50% rise credited to strong profits

October 24, 1992|By David Conn | David Conn,Staff Writer

Fresh from two quarters of strong profits, Richmond-based Signet Banking Corp. announced yesterday that it will boost its quarterly common-stock dividend by 50 percent, to 30 cents a share.

The dividend, which the company and analysts called a strong sign of Signet's optimism about the future, will be paid Nov. 25 to shareholders of record as of Nov. 3.

Signet, which owns bank subsidiaries in Virginia, Washington and Maryland, last changed its dividend rate in March of last year, when it cut the quarterly payment nearly in half, to 20 cents, from 39 cents.

With 27.8 million shares outstanding, the new policy means the company will pay about $33.4 million a year to its nearly 15,500 shareholders, up from $22.2 million.

"We are pleased and encouraged by the results from our nine months of operations in 1992," Robert M. Freeman, chairman and chief executive officer, said in a statement yesterday. "This dividend increase is a strong signal that our earnings recovery is solid and sustainable."

For the nine months that ended Sept. 30, Signet earned $77.4 million, or $2.79 a share, up nearly 200 percent from 1991. The company lost $25.7 million last year because of a $52 million fourth-quarter loss.

At the same time, Signet's non-performing assets dropped to $242.5 million in the latest quarter, down 18 percent from the second quarter and more than 30 percent from a year ago. Total assets on Sept. 30 were $11.6 billion.

John Heffern, a banking analyst at Alex. Brown Inc., said the increased dividend brings Signet back in line with its historical payout rate of 30 percent to 35 percent of annual earnings per share. Mr. Heffern expects Signet to earn $3.80 a share this year.

"I think it's management's way of signaling to the market their confidence in the sustainability of the earnings improvement," he said.

The market welcomed the move, driving Signet's stock up $1.125, to $39, in heavy trading on the New York Stock Exchange.

Even so, Mr. Heffern said the stock was substantially undervalued. The group of regional banks comparable to Signet is trading at about 1.6 times book value, he said. Based on yesterday's closing price, Signet is trading at 1.36 times its Sept. 30 book value of $28.77 a share.

Investment in the company is "not a slam dunk," Mr. Heffern said, noting the continued existence of the non-performing assets. "But they have made a lot of progress, and they seem to be moving in the right direction."

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