In order to enhance shareholder value, Allied World Assurance Company Holdings, AG (AWH - Snapshot Report) has proposed a 33% increase in its quarterly dividend. The company recently filed a Preliminary Proxy Statement containing the proposal to increase the quarterly dividend to 50 cents per share from 37.5 cents paid earlier.
However, the proposal is yet to be approved by Allied World’s shareholders. The issue will be considered in the company’s 2013 Annual Shareholder Meeting on May 2, 2013.
The increased dividend of Allied World, if approved, will translate into an annual dividend yield of 2.27%, based on the closing share price of $88.12 as of Mar 8. The current dividend yield is much lower at 1.70%.
Allied World will pay the dividend from its general legal reserve from capital contributions. The payment will be made in U.S. dollars.
If the proposal is approved, Allied World will require $69.6 million for dividend payment in 2013, based on the 34.8 million shares outstanding as of Dec 31, 2012. The company has a strong capital position with ample liquidity for the dividend payment. Allied World had cash and cash equivalents of $681.9 million as of Dec 31, 2012.
Last month, another property and casualty insurer XL Group plc (XL - Analyst Report) announced a 27% hike in its quarterly dividend to 14 cents per share. The increased dividend will be paid on Apr 1, 2013 to the shareholders of record as of Mar 15, 2013. This amounts to an annualized dividend yield of nearly 2% based on the closing share price of $28.99 on Feb 22, 2013, when the hike was announced.
Allied World currently carries a Zacks Rank #2 (Buy). Other property and casualty insurers worth considering are Cincinnati Financial Corp. (CINF - Analyst Report) and Navigators Group Inc. (NAVG - Snapshot Report). Both these companies carry a Zacks Rank #1 (Strong Buy).