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Analyst Blog

Recently, WellPoint Inc. announced a 30% hike in its quarterly dividend to 37.5 cents per share, beginning first quarter 2013, from 28.75 cents paid earlier. This amounts to an annualized dividend yield of 2.4% based on the closing share price of $62.71 on Feb 21, 2013.

The increased dividend will be paid on Mar 25, 2013 to shareholders of record as of Mar 8. The new quarterly dividend requires a payout of $1.50 per share every year, compared with $1.15 needed earlier.

However, WellPoint has sufficient cash balance and strong cash flow to support its capital deployment plans. The company exited 2012 with cash and cash equivalents of $2.48 billion and generated operating cash flow of over $2.7 billion during the year.

WellPoint expects to return almost $2 billion to shareholders in the form of dividends and share repurchase in 2013. Its strong capital and cash position have fueled cash dividends and stock repurchases. The company initiated cash dividends in early 2011. It has also been aggressively buying back shares over the recent years and is constantly utilizing its excess capital to boost shareholder value.

WellPoint spent $2.5 billion for repurchasing 39.7 million shares in 2012. Moreover, the total amount spent on dividend payment in 2012 was $367.1 million. As of Dec 31, 2012, the company had shares worth approximately $1.8 billion remaining under its repurchase authorization.

WellPoint currently carries a Zacks Rank #3 (Hold). Other health management organizations worth considering are Coventry Health Care Inc. , Molina Inc. (MOH - Analyst Report) and Amedisys Inc. (AMED - Analyst Report). All these companies carry a Zacks Rank #2 (Buy).

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