Schwab's Liquidity Cushion: Does it Make Capital Returns Sustainable?

Charles Schwab SCHW enjoys a strong liquidity position and remains focused on maintaining a low-cost capital structure. As of June 30, 2025, cash and cash equivalents were $32.2 billion. As of the same date, total debt was $37.7 billion. 

Moreover, SCHW maintains investment-grade long-term credit ratings of A2, A- and A from Moody’s, S&P Global Ratings and Fitch Ratings, respectively, and a stable outlook. These ratings indicate a strong financial position with low credit risk. This, along with Schwab’s resilient earnings and strong fundamentals, supports robust capital returns. 

Hence, in July, the company announced a new share repurchase program, authorizing $20 billion. This replaced the prior plan (which had almost $6.9 billion remaining as of June 30, 2025) and reflects confidence in the company’s financial momentum and long-term prospects. 

Further, in January 2025, Schwab raised its quarterly dividend by 8% to 27 cents per share. In the past five years, the company has increased its dividends four times at an annualized growth rate of 10.62%. Further, SCHW has a dividend payout ratio of 27%, which is within its target of 20-30% of GAAP earnings.

With robust liquidity, a strong capital base and earnings strength, Schwab is well-positioned to sustain higher dividends and aggressive share repurchases.

How is Schwab Placed in Capital Returns Compared With Peers?

Schwab’s two close peers are Interactive Brokers IBKR and Robinhood Markets HOOD.

Interactive Brokers has been consistent with its dividend payment for a long time. In April, it announced a 28% jump in quarterly dividend to 25 cents per share. This followed a whopping 150% surge in dividends announced in April 2024. In the past five years, the company increased its dividends twice at an annualized growth rate of 24.71%. 

Also, it implemented a four-for-one forward split of its common stock in June 2025 to make shares more accessible to investors. Interactive Brokers uses insignificant debt to finance its operations. Thus, given a solid liquidity position, the company is expected to be able to sustain its dividend payments in the future, thus enhancing shareholder value.

Meanwhile, Robinhood doesn’t pay dividends. The company has a share repurchase plan in place. In May 2024, it announced a share repurchase program worth up to $1 billion. In April 2025, Robinhood authorized the buyback of an additional $500 million worth of shares under the plan. 

As of June 30, 2025, nearly $797 million worth of shares remained available for repurchase. Given a decent liquidity and balance sheet position, Robinhood’s share buybacks will likely be sustainable.

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

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