Last week, the Board of Directors of Westamerica Bancorp. (WABC) approved a new share repurchase program. Under this authorization, the company will be repurchasing up to 2 million common shares through September 1, 2013.
The shares under the authorization represent about 7% of Westamerica’s outstanding common stock as of June 30, 2012. Additionally, the buybacks will be held periodically, depending on the market conditions through the open market or privately-held negotiations.
Over the last two years, Westamerica has twice announced its decision to buyback shares. In August 2010, the management had authorized repurchase of up to 2 million shares by September 1, 2011. Likewise, last year, the company declared a share buyback plan that allows it to repurchase up to 2 million shares through September 1, 2012.
During 2011 Westamerica repurchased 1.32 million shares for an aggregate price of $60.6 million. Further, in the first half of 2012, the company bought back 566,000 shares worth about $26.1 million.
Concurrent with the announcement of the share buyback plan, Westamerica declared a quarterly cash dividend of 37 cents per share. The dividend is payable on August 17 to shareholders of record at the close of business on August 6.
Since 2010, the company has raised its quarterly cash dividends twice. The latest announcement was made in October 2011, when the company hiked its quarterly dividend by 2.8%.
Westamerica has a healthy capital and cash position, which allows it to maintain a stable capital deployment strategy. We believe that the company would continue with its initiatives to boost shareholders’ value in the subsequent years as well.
Similar to Westamerica, one of its peers – Columbia Banking System Inc. (COLB) continues to enhance shareholders’ value through dividend hikes. Recently, Columbia increased its quarterly cash dividend by 13% to 9 cents per share.
Earlier in October 2011, it had raised its quarterly dividend by 33% from 6 cents. Further, the company recently announced a special dividend of 21 cents, pertaining to its strategy of announcing special dividends at regular intervals.
Westamerica currently retains a Zacks #4 Rank, which translates into a short-term Sell rating. Also, considering the fundamentals, we maintain a long-term Underperform rating on the stock.
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