For the second time since 2007, the board of global multi-line insurer MetLife Inc. (MET - Analyst Report) announced a 27% hike in its regular dividend payout to 35 cents per share from the prior 27.5 cents.
Following the announcement, early on Tuesday, MET's stock price climbed 1.5% and closed at $51.90. The raised annual dividend generates a dividend yield of 2.7%, up from prior payout-yield of 2.1%.
The last dividend increase of 49% had been declared in Apr 2013, while the latest hike brings the total annual dividend to $1.40 per share from $1.10. Accordingly, the hiked dividend will be paid on Jun 13, 2014 to the shareholders of record as on May 9.
Although MetLife has withheld share repurchases, we believe appreciation of shareholder value through dividend payouts also instill confidence in the stock. Additionally, optimistic long-term growth, particular within the company’s U.S. and emerging markets, assures buoyancy amid economic volatility and low interest rate environment.
MetLife holds one of the sturdiest capital positions in the industry, which is cushioned by a diversified portfolio mix and a leading brand, as reflected by over 40% earnings growth in 2011–2013, healthy return on equity (ROE) of 12% at 2013-end, ratings and efficient business restructuring. Moreover, the company maintains steady cash flows and a diminishing risk-profile with a financial leverage that improved to below 28% in 2012 and 2013.
However, the ongoing regulatory challenges and the risk of being acknowledged as a systemically important financial institution could put MetLife under the Federal Reserve’s supervision and further amplify capital compliances.
Nonetheless, MetLife’s confidence lies in its strong fundamentals that has supported a modest dividend increment, similar to industry peers. Earlier this month, Aon Plc (AON - Analyst Report) hiked its dividend by 43%. Among others, arch-rival –American International Group Inc. (AIG - Analyst Report) along with RenaissanceRe Holdings Ltd. (RNR - Analyst Report), AmTrust Financial Services Inc. (AFSI - Snapshot Report) and United Insurance Holdings Corp. (UIHC - Snapshot Report) raised their dividends by 25%, 3.6%, 43% and 33.3%, respectively, in Feb 2014.
While MetLife and United Insurance carry a Zacks Rank #4 (Sell), RenaissanceRe sports a Zacks Rank #1 (Strong Buy). All other aforementioned stocks carry a Zacks Rank #3 (Hold).
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