MetLife Dividend Hike Looks More Likely After Losing Bank Holding Co. Status

Banking, finance, and taxes

Published: February 14, 2013 1:50 pm

MetLife, Inc. (NYSE: MET) is finally losing its artificial status as a bank holding company. The insurance giant announced on Thursday that it has finally received the required approvals from both the Federal Deposit Insurance Corporation and from the Federal Reserve’s Board of Governors to deregister as a bank holding company.

MetLife completed its sale of MetLife Bank’s depository business to General Electric Capital back on January 11. While today’s news should have been easy to expect and while the move has been planned for some time, this is good news for investors. MetLife can now finally start trading as an insurance company rather than having a “bank stock penalty” in its stock.

MetLife serves roughly 90 million customers with insurance, annuities and employee benefit programs. It was hardly a bank to begin with, but the GE Capital deal eliminated any and all forms of it being a bank.

One big issue to consider is that MetLife is considered to be very healthy on its own, yet its common stock dividend yield is only about 2.0%. We would note that MetLife’s $0.74 annualized per share dividend just had a quarterly payment in recent weeks. Why this matters is that MetLife’s dividend has been stuck at $0.74 since 2007.

If you take a look at the Thomson Reuters consensus estimates, the insurance giant is expected to have earnings of $5.26 per share in 2013 versus $5.21 per share in 2012. In short, MetLife’s regulators had been keeping a lid on its dividend payments. Shares have been lower after earnings but here are the book values per share: $46.73 excluding AOCI and $57.17 stated.

With shares down almost 3% at $36.50 with a 52-week range of $27.60 to $39.55, MetLife has a market cap of just under $40 billion. The Thomson Reuters consensus price target is $43.17.

By changing the bank holding company status MetLife is now likely to lift its dividend substantially. The change in the past practice is that MetLife used to pay annual dividends rather than quarterly. By moving to the quarterly status we think this makes a MetLife dividend hike likely sooner rather than later.

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