Comerica: Financial Winner

Looking for a high payout ratio following stress tests.

Comerica's shares have now returned 17% year-to-date, following a 38% decline during 2011.

The shares trade for 0.9 times book value, according to Thomson Reuters Financial Insight, and for 11 times the consensus 2013 EPS estimate of $2.63. The consensus 2014 EPS estimate is $2.77.

Based on a quarterly payout of 15 cents Comerica's shares have a dividend yield of 2.01%. Following the last round of Federal Reserve stress tests in March, the company was approved to repurchase up to $375 million worth of common shares, through the first quarter of 2013. Including shares repurchased as part of deferred compensation plans, Comerica bought back $215.5 million worth of shares during the first three quarters of 2012.

Bank of America Merrill Lynch analyst Erika Penala on Monday estimated that following the next round of stress tests, Comerica will be approved to raise the quarterly dividend by a penny and buy back another $321 million worth of shares, which would give the company a combined payout ratio of 101% during 2013.

While being approved to pay out more of its earnings would certainly signal regulators' comfort with the company's capital strength, Bank of America Merrill Lynch still has a "Neutral" rating on Comerica. Penala said that "while buying back stock in a [tangible book value, or TBV] accretive manner is a positive (TBV was $33.63 in 3Q12), a challenged return outlook (we forecast average ROTE of 7% over the next two years) is likely to temper valuations and stock performance as CMA struggles to earn its cost of equity in a low rate environment."

CMA data by YCharts

Interested in more on Comerica? See TheStreet Ratings' report card for this stock.

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-- Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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