Is Federated Hermes Poised to Sustain Its Capital Return Strategy?

Federated Hermes, Inc. FHI maintains a disciplined capital allocation strategy focused on returning value to shareholders through dividends and share repurchases.

The company has a strong dividend track record, having paid regular dividends since its initial public offering in 1998. In April 2026, FHI raised its quarterly dividend by 11.8% to 38 cents per share, further strengthening its shareholder return profile.

Over the past five years, FHI has increased its dividend five times, delivering an annualized growth rate of 9%. Its payout ratio stands at 28%, while the stock currently offers a 2.3% dividend yield. The moderate payout ratio provides the company with flexibility to retain earnings for business investments while continuing to reward shareholders.

Dividend Yield

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Beyond dividends, Federated Hermes actively returns capital through share repurchases. In July 2025, its board authorized the company’s 18th repurchase program, allowing it to buy back up to an additional 5 million shares with no expiration date. With three active programs, its total repurchase authorization reached 15 million shares. As of June 30, 2026, nearly 2.3 million shares remained available for repurchase, providing additional capacity for capital deployment.

Meanwhile, FHI continues to pursue strategic acquisitions to strengthen its asset management platform and expand assets under management. In April 2026, the company acquired an 80% stake in FCP Fund Manager, adding approximately $3.2 billion in U.S. multifamily real estate managed assets. Earlier acquisitions, including Rivington Energy Management and C.W. Henderson, further expanded its infrastructure and separately managed accounts capabilities. These investments are positioning FHI to support both growth initiatives and shareholder returns.

The company also maintains a solid liquidity profile. As of June 30, 2026, it had $480.7 million in cash and other investments compared with $348.5 million in long-term debt. It also had access to a $350 million unsecured revolving credit facility, with no outstanding borrowings. The healthy liquidity position provides financial flexibility to meet its obligations, pursue growth opportunities and navigate challenging economic conditions.

With consistent dividend growth, additional share repurchase capacity, strategic acquisitions and a solid liquidity profile, FHI is well-positioned to balance shareholder returns with investments that can drive sustainable long-term growth.

Where Do FHI’s Peers Stand in Terms of Capital Returns?

Similar to Federated Hermes, its peers T. Rowe Price Group, Inc. TROW and Franklin Resources, Inc. BEN have also strengthened shareholder returns through dividend increases and buybacks.

T. Rowe Price raised its quarterly dividend by 2.4% to $1.30 per share in February 2026, marking another annual increase since its IPO in 1986. In March 2020, T. Rowe Price approved a repurchase plan for 24.1 million shares, which was increased by nearly 15 million shares in 2020 to 39.1 million shares. As of June 30, 2026, 6.9 million shares remained available under the authorization.

Meanwhile, Franklin Resources announced a 3.1% increase in its common stock dividend in December 2025. Franklin Resources also authorized an additional 20.8 million shares for repurchase, bringing the total authorization to 40 million shares, with $35.6 million worth of shares remaining available as of June 30, 2026.

FHI’s Price Performance and Zack Rank

Shares of the company have gained 16.7% in the past six months compared with the industry’s growth of 12.7%.

Price Performance

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Federated Hermes currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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