As an extension of the previous capital management plan, the board of Hartford Financial Services Group, Inc. (HIG - Analyst Report) has decided to increase its quarterly dividend and share repurchase activity. The company will pay a 50% higher dividend, i.e. 15 cents per share, on Oct 1, 2013.
The increased dividend implies a yield of 2% per annum for Hartford Financial, based on the closing share price of $29.99 as on Jun 26, 2013. The company is yet to pay a quarterly dividend of 10 cents per share on Jul 1, 2013 to shareholders of record as of Jun 3. This translates into a yield of 1.33%.
Further, the board of Hartford Financial increased the share repurchase authorization by $750 million. As a result, total buyback authorization, including the $500 million authorized in Feb 2013, totals $1.25 billion. The authorization will expire on Dec 31, 2014.
Hartford Financial has already spent $166 million on buybacks under the current authorization. The planned increase in dividend and buyback expenditure is a result of the strong financial position, lower risk and increasing financial flexibility of the company.
Hartford Financial’s capital raise, repayment of government funds and measures to de-risk its balance sheet have increased its financial strength. The capital management plan announced in Feb 2013 helped boost financial flexibility by reducing debt and returning more value to shareholders through share repurchase. The self-sufficiency of the Talcott Resolution segment with regards to capital also played an important role.
Hartford Financial carries a Zacks Rank #3 (Hold). Other multi-line insurance companies worth considering are AXA Group (AXAHY), Eastern Insurance Holdings, Inc. and Enstar Group Limited (ESGR - Snapshot Report). All these companies carry a Zacks Rank #1 (Strong Buy).