SunTrust Banks
(NYSE:STI) shares dropped over one percent today after the company
announced several initiatives to enhance shareholder value, concluding
its process of exploring various "value initiatives". These initiatives
are focused in three areas: efficiency and productivity, SunTrust's
ownership of Coca-Cola common stock and capital optimization/balance
sheet management.
SunTrust's primary objective is to sell its
stake in Coca-Cola, which is one of the largest components of its
portfolio. The company then plans to use that money to repurchase $750
million to $1 billion of their own stock during the rest of 2007.
Through a combination of its previously announced 20% dividend increase
and anticipated share repurchases, the company expects to return over
90% of its earnings to shareholders in 2007!
SunTrust also
expects its cost cutting efforts to result in an annual gross cost
savings for 2009 of $530 million - nearly 50% greater than its original
estimates. Additional efficiency and productivity improvements may also
make their way to the company's bottom line by 2009.
While
many shareholders were clearly hoping that this process would result in
a sale of the company (that's why its down today), 90% of earnings
being returned to shareholders is certainly nothing to complain about!
STI is a stock
worth watching closely over the next year as they begin to execute their plan...
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