Morgan Stanley says it will raise its dividend to 15 cents and buy back up to $3.1 billion in stock after the Federal Reserve System signed off on the plan.
Morgan Stanley says it will buy back the stock over five quarters starting in the second quarter of 2015. The company had paid a quarterly dividend of 10 cents.
The move means the Federal Reserve has concluded that Morgan Stanley can afford the larger dividend and the stock repurchase and remain adequately capitalized.
The Fed said Morgan Stanley was one of 31 banks that passed its annual "stress tests" on Thursday. The tests are designed to show that the largest banks in the U.S. are strong enough to withstand a severe U.S. and global recession and keep lending.