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Delphi Declares Share Buyback

by Zacks Equity Research

August 12, 2011 | Comments : 0 Recommended this article: (0)

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Earlier during the week, Delphi Financial Group Inc. (DFG) announced a new $50 million share repurchase authorization, which will replace the existing authorization to buy back 1.0 million shares.

Delphi also announced regular quarterly dividend of 12 cents per share, which will be payable on August 31, to the shareholders of record as of August 17, 2011. During May, the company announced a 9% hike in quarterly dividend to 12 cents, marking a single cent increase from the previous quarter. With the increased annual dividend of 48 cents per share, Delphi ’s dividend yield stands at 1.6%. The company has been consistently increasing dividends since its initiation of dividend payment in 2001. Delphi has grown its annual dividend by an average of 16.7% over the past five years.

Delphi’s balance sheet solidity is derived from its long-tail and stable group insurance liability. Its low debt-to-capital ratio, which currently stands at 17%, also accounts for its inherent strength.

Delphi posted strong second quarter earnings, with revenue increase of 12.6% year over year, led by increased fees and premium income, higher net investment income and lower impairment losses. Though the bottom-line earnings of 86 cents per share missed the Zacks Consensus Estimate by 5 cents, it was up year over year by 7 cents per share.

Delphi competes with life as well as property and casualty insurers. Reinsurance Group of America Inc. ( ( RGA - Analyst Report ) ), StanCorp Financial Group Inc. ( ( SFG - Analyst Report ) ), Torchmark Corp. ( ( TMK - Analyst Report ) ), and Unum Group ( ( UNM - Analyst Report ) ) are some of the life insurance peers of Delphi. Its property and casualty competitors include American Financial Group, Inc. ( ( AFG - Snapshot Report ) ), American Safety Insurance Holdings Ltd. ( ( ASI - Snapshot Report ) ) and W.R. Berkley Corp. ( ( WRB - Analyst Report ) ).

The stock of Delphi carries a Zacks Rank # 2, which implies a ‘Buy’ rating over the near term. However, over the longer term (6+ months), we carry a “Neutral” outlook on the stock.

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