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Despite basking in a modest third quarter, yesterday, the board of Lincoln National Corp. ( LNC - Analyst Report ) has announced a significant 60% increase in its quarterly dividend to 8 cents per share from the previous pay out of 5 cents. The hiked dividend will be paid on February 1, 2012 to shareholders of record as on January 10, 2012.
This marks the second dividend hike since 2007. In November last year, Lincoln had raised its quarterly dividend from 1 cent to 5 cents per share. The company’s restructuring initiatives taken up last year have paid off well. The current hike also reflects Lincoln’s capital and liquidity strength.
With a quarterly operating return on equity (ROE) of 13.4% at the end of third quarter 2011, up from 9.4% at the end of the prior-year quarter, Lincoln has strengthened its balance sheet and cash position. This is primarily attributable to improved consolidated deposits and net inflows that also drove the book value per share.
The upsides have also helped Lincoln deploy excess capital efficiently. Earlier, during the fourth quarter of 2010, the company had announced its objective of buying back common equity shares worth approximately $125 million, over the following 15 months. However, Lincoln has successfully repurchased 14.2 million shares for a total cost of $300 million, until the third quarter of 2011.
Lincoln’s third quarter operating earnings of $1.00 per share came in modestly ahead of the Zacks Consensus Estimate of 93 cents and 63 cents recorded in the prior-year quarter. Meanwhile, operating net income surged 53.9% year over year to $317.3 million.
Besides, the Zacks Consensus Estimate for the fourth quarter is currently pegged at 97 cents, expected to increase about 19% over the year-ago period. Over the last 30 days, 4 of the 15 analyst firms have raised their estimates, while 7 downward revisions were witnessed. For 2011, earnings are projected to jump about 32% to $4.14 per share over 2010.
On Thursday, the shares of Lincoln closed at $19.54, up 4.3%, on the New York Stock Exchange. At this price and the hiked dividend, Lincoln’s dividend yield stands at 0.41%, up from the previous yield of 0.26%. However, this dividend yield is significantly lower than Prudential Financial Inc.'s ( PRU - Analyst Report ) 2.66% and MetLife Inc.’s ( MET - Analyst Report ) 2.10%, the two major insurance giants.
Besides, the quantitative Zacks rank for Lincoln currently stands at #3, indicating a short-term Hold rating. The long term stance also remains Neutral.
Most of the other insurers in the industry have been efficiently deploying capital through dividends and share repurchases. Last month, Aflac Inc. ( AFL - Analyst Report ) also announced a 10% hike in its quarterly cash dividend to 33 cents from 30 cents per share.
Earlier this week, Allstate Corp. ( ALL - Analyst Report ) announced a new share repurchase program worth $1.0 billion, while Prudential also raised its annual dividend by 26% to $1.45 from $1.15 per share. Earlier this month, Amerisafe Inc. ( AMSF - Analyst Report ) extended its share buy back program to $25 million.
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