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Life and health insurer Torchmark Corp. ( TMK - Analyst Report ) has recently announced a quarterly dividend of 12 cents per share, which marks an increase of 9.0% from the previous dividend of 11 cents.
Torchmark increased its dividend at an average rate of approximately 7.0% between 2001 and 2010. With its current stock yield of 1.38%, the company features on the list of laggards in dividend yield. Some of the leaders in dividend yield in the life insurance industry are Life Partners Holdings Inc. ( LPHI ) , Sun Life Financial Inc. ( SLF - Analyst Report ) , and Prudential Financial Inc. ( PRU - Analyst Report ) , with dividend yields of 13.50%, 5.50% and 2.50%, respectively.
Prior to the recent dividend increase, Torchmark hiked its dividend in the first quarter of 2010 by a penny to 15 cents per share and again increased it to 16 cents per share in the fourth quarter of 2010.
Torchmark have also been active in repurchasing shares. However, it suspended its share repurchase program in March 2009 following the difficult market conditions but again reinstated the program in the first quarter of 2010. For the first six months of 2011, the company has spent $602 million to buy 14 million of its shares.
Torchmark stands solid from the balance sheet perspective as well. It carries a moderate amount of leverage on its balance sheet. Management expects to generate approximately $4,180 million of free cash flow in the next two quarters of 2011. Considering an adequate amount of cash available for deployment and favorable operating conditions, we expect the company to maintain its dividend track.
Torchmark reported second quarter earnings of $1.14 per share, surpassing the Zacks Consensus Estimate by a cent, on the back of higher underwriting income, increased investment income and a lower share count.
We maintain our long-term “Neutral” recommendation on Torchmark. The quantitative Zacks #3 Rank (short-term ‘Hold’ rating) for the company indicates no clear directional pressure on the stock over the near term.
McKinney, Texas-based Torchmark Corp. through its subsidiaries provides annuities, whole and term life insurance, accidental death insurance, health insurance, Medicare supplements and long-term healthcare policies. It competes with Prudential Financial Inc. and Unum Group ( UNM - Analyst Report ) .
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