Back to top

Analyst Blog

The board of directors of Donegal Group Inc. (DGICA) approved a dividend hike on both Class A and Class B shares. While a 3.1% dividend increase was approved for Class A shares, a 0.9% hike was sanctioned for Class B shares.

Consequently, the company will now pay quarterly dividend of 13.15 cents per Class A share and 11.60 cents per Class A share.
The newly increased dividends will be paid on May 15, 2014 to shareholders of record as of May 1, 2014. Based on the closing share price of $15.00 on April 17, the increased dividend implies a yield of 3.5%. Donegal Group has a solid track record of increasing dividend every year. Its dividend has grown at a 5-year CAGR of about 4.6%. The last dividend hike had been affected in April last year with the board approving a 4.1% increase in Class A and 4.5% increase in Class B shares.

Based on 20.4 million Class A shares outstanding at the end of 2013, Donegal Group will have to dish out around $2.7 million as quarterly dividend. Its liquidity position is sound enough to support the payout. While cash balance improved 39% over 2012, cash from operations nearly doubled. Retained earnings stood solid at nearly $223 million (up 6.3% over 2012).

Donegal Group does not stand alone in the league of dividend increases. Several insurers have approved dividend hikes in an intention to boost their shareholders’ value. Recently, the board of directors of AmTrust Financial Services, Inc. (AFSI - Snapshot Report) increased its dividend by 43% to 20 cents per share. The board of directors of XL Group plc (XL - Analyst Report) called for a 14.3% hike in its quarterly dividend to 16 cents per share. Furthermore, the board of directors of Infinity Property and Casualty Corp. (IPCC - Snapshot Report) approved a 20% increase in its quarterly cash dividend to 36 cents per share. Concerted efforts on the part of the company to share more profit with shareholders not only retain investor confidence, but also help attract potential investors to the stock.

Besides dividend hikes, Donegal Group also repurchases shares, which in turn lowers the share count and boosts earnings per share – another avenue to enhance shareholders’ value. As such, last July, the board of directors authorized the company to buy back 0.5 million of its Class A shares.

There was no earnings momentum for Donegal Group over the last 60 days. With the news of increase in dividend, we expect analysts to raise their estimates exerting upward pressure on the Zacks Rank. Donegal Group presently carries a Zacks Rank #3 (Hold).

Read the Full Research Report on XL
Read the Full Research Report on AFSI
Read the Full Research Report on DGICA
Read the Full Research Report on DGICB
Read the Full Research Report on IPCC

Zacks Investment Research

Please login to or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research


Are you a new Zacks Member or a visitor to

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
SIGNET JEWE… SIG 116.37 +7.72%
CHYRONHEGO… CHYR 2.72 +5.84%
US SILICA H… SLCA 70.72 +4.00%
MALLINCKROD… MNK 80.11 +2.32%
RF MICRO DE… RFMD 11.76 +2.31%