Capital One (COF) Payout Above Expectations - FBR Capital

FBR Capital analyst Paul J. Miller reiterated an Outperform rating and $85 price target on Capital One Financial (NYSE: COF) after the company's capital plan was higher than expected.

Miller comments, "Capital One payout higher than expected. Capital One announced that it was approved by the Federal Reserve and its board of directors to repurchase $2.5B of common stock and maintain the $0.30/quarter dividend (1.6% dividend yield). We expect investors to react positively to the announcement given the high implied payout ratio (79% of NTM net income) and focus on share repurchases. Compared to our forecast, the dividend is less than expected (versus a 5% increase in the dividend to $0.315/quarter), while the $2.5B share repurchase plan is greater than we expected (versus a $2B estimate). The payout ratio of roughly 79% of estimated NTM net income (2Q14 to 1Q15) compares favorably to our forecast of a 68% payout ratio. We hold our FY14 EPS estimate at $7.08 and our FY15 EPS estimate at $7.36. We continue to view COF shares as attractive given the company's multiple catalysts, which include the resumption of YOY credit card receivables growth in 2H14 and the ability to reduce operating expenses beyond management guidance."

For an analyst ratings summary and ratings history on Capital One Financial click here. For more ratings news on Capital One Financial click here.

Shares of Capital One Financial closed at $74.96 yesterday.

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