KeyCorp: Mixed Q3 2018 Results, But The Stock Has One Near-Term Catalyst

Oct. 20, 2018 1:04 AM ETKeyCorp (KEY)1 Comment
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WG Investment Research


  • KeyCorp reported Q3 2018 results that were not well-received by the market.
  • The bank's growing dividend (and capital return plan) may be the only near-term catalyst for the stock.
  • I am long KeyCorp and may build the position over the next few quarters.
  • This idea was discussed in more depth with members of my private investing community, Going Long With W.G.. Start your free trial today »

KeyCorp (NYSE:KEY) recently reported Q3 2018 financial results that were not well-received by the market, as shown by the almost 6% decline in the stock price over the last five days. On an YTD basis, KEY shares have significantly underperformed the broader market.

ChartKEY data by YCharts

It was hard to find many positive takeaways from KeyCorp's most recent results, but in my opinion, this regional bank will be able to bounce back. The dividend may be the only thing going for this bank for the time being, of course, besides an improving backdrop that should help management get the company back on track.

The Near-Term Catalyst, The Dividend

KeyCorp has long been a shareholder-friendly company, and I do not expect for this to change anytime soon. The most recent example of management showing its commitment to shareholders was the over 40% increase in the bank's dividend.

Source: Fidelity

Looking back, KeyCorp has a 5-year dividend growth rate of over 25% and, more importantly, the bank still has the wiggle room to grow it in the years ahead. It should also be noted that the bank repurchased approximately $540M worth of its stock during Q3 2018 and still has a sizable amount of dry powder to deploy over the next few quarters (the board recently approved a $1.2B, or approximately 6% of the bank's total market cap, buyback program). The buyback is important especially as the shares decline in value.

Therefore, while the Q3 2018 results were nothing to brag about, I believe that KeyCorp's capital return plan is enough to buy management some time, at least over the next quarter or two.

The Q3 2018 Results, Nothing To Brag About

On October 18, 2018, KeyCorp reported in line Q3 2018 earnings, but the top-line missed the consensus estimate. The bank reported

ChartKEY Price to Tangible Book Value data by YCharts

This article was written by

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Our President and CIO is a CPA with experience in public accounting and the financial services industry. He earned his Master of Accountancy degree in 2008 and his B.S. in Business Management in 2007. He is also a Level III CFA candidate. He has been intrigued by the market from the start. Over the years, he has learned that long-term investing is a discipline that, if followed, will help contribute to building lasting wealth. As such, most of our articles will be about the investments that we plan to hold for at least 3 to 5 years, as long as the company's story does not change. As a Seeking Alpha contributor, our main goal is to write about the companies that are key to our portfolio with the hope of promoting discussion (for or against the investment) from others within the SA community.Please visit our website for more information about W.G. Investment Research LLC.

Disclosure: I am/we are long KEY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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