Basking after a strong third-quarter 2013, the board of Lincoln National Corporation (LNC - Analyst Report) announced a 33% hike in its regular quarterly dividend of 12 cents a share. This marks the company’s fourth dividend hike since 2007, inflating shareholder value.
Accordingly, the raised dividend per share of 16 cents will be paid on Feb 1, 2014, to shareholders of record as on Jan 10, 2014. A 33% hike also expanded the annual dividend to 64 cents a share from the prior 48 cents. Based on Thursday’s closing price of $49.99, the raised dividend generates a dividend yield of 1.28%.
The prior dividend of 12 cents per share was last paid on Nov 1, 2013, to the shareholders of record as on Oct 10, 2013. Previously, in Nov 2012, Lincoln had increased its annual dividend by 50%, which was backed by a 60% hike in dividends in Nov 2011.
Given the ongoing economic volatility that has been pressurizing the bottom line of most insurers, the current hike appears commendable and optimistic. A prudent capital management has also helped Lincoln return higher-than-expected excess capital to its shareholders, thereby infusing value-added confidence among investors.
Over the last couple of years, Lincoln National has outpaced its share buyback target by repurchasing shares worth $575 million in 2011, $492 million in 2012 and an additional $350 million worth of shares in the first nine months of 2013.
Lincoln National remains strong on account of expanded distribution relationships, and a diversified product portfolio. Improved financial leverage also enhances capitalization, mitigates balance sheet risks, aids incremental capital deployment, and provides liquidity cushion for long-term investment.
Although economic volatility, competition, and low interest rate environment restrict desired upside in the near-term, Lincoln National is poised to grow in the long run and retain investor confidence, as reflected by sound ratings.
Lincoln National presently sports a Zacks Rank #2 (Buy). Some other outperforming insurers such as Primerica Inc. (PRI - Snapshot Report), China Life Insurance Co. Ltd. (LFC - Analyst Report) and American Equity Investment Life Holding Co. (AEL - Snapshot Report) also carry the same Zacks Rank and are worth consideration.