Morgan Stanley Paired Its Dividend Hike With a $20 Billion Buyback. Is the Wealth Management Giant a Buy?

The results of this year's "stress tests" of the nation's biggest banks are in -- and they were good. All 32 banks under the Federal Reserve's microscope are well capitalized to survive a significant recession. And while not all of them have done so (yet), several of the country's major banks have subsequently increased dividends and stock buybacks after passing this test.

Morgan Stanley (NYSE: MS) is one of these names, recently announcing a 15% increase in its per-share dividend and the reauthorization of a $20 billion stock buyback. For perspective, the stock's forward-looking dividend yield is just under 2.2%, while the company's market cap is $334 billion.

The big question: Is its stock a buy now?

Morgan Stanley under the microscope

Technically, it's a bank, although checking, savings accounts, lending, or even trading aren't its core business. Morgan Stanley is predominantly an investment bank and fee-based investment manager. Institutional banking accounted for roughly half of Q1's revenue -- which was up 16% year over year -- while its money management arm, which generates reliably recurring fee revenue, made up the other half.

This reliable revenue stream is a major reason this stock trades at a premium. Although not outrageously priced compared to this year's projected per-share profits of $11.97, an earnings multiple of around 18 thanks to the stock's recent bullishness isn't exactly a bargain compared to other companies in the business. The stock's also already trading right around analysts' current consensus target of $210.95.

If you can be patient, though, this steep valuation is still arguably worth it to true long-termers. Outside of the headwinds you'd expect (like the recession following the subprime mortgage meltdown of 2008), Morgan Stanley has a history of above-average dividend growth occasionally boosted by stock buybacks that have reduced its total outstanding share count by about 20% just since 2012.

The factors funding these dividends and buybacks are largely still in place, too. That's a bull market that's pumping up its wealth management's fee-bearing asset base and an investment banking business that's already roaring and on the cusp of outright accelerating. Numbers gathered by Bloomberg indicate a record-breaking $251 billion was raised in the first half of 2026 alone, with AI powerhouses like OpenAI, Anthropic, and others thinking about going public in the foreseeable future.

Image source: Getty Images.

Meanwhile, in an effort to steer its money management clients away from public markets' heightened volatility, Morgan Stanley is expanding access to private markets and alternative investments through its PMAX Balanced and PMAX Growth funds. This could also prove a brilliant decision, given investors' growing concern over the steep valuations of publicly traded outfits.

Perfect for this purpose

Morgan Stanley stock is a buy. Just make sure you have realistic expectations. This isn't a growth stock by any measure. It's a very high-quality dividend-paying value company, though, for patient, long-term investors. Its money management business's predictability offers the sort of certainty that merits and maintains a premium price.

James Brumley has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.