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The shareholders of ACE Limited (ACE - Analyst Report), at the extraordinary general meeting held on May 16, 2013, approved the board’s proposal to hike the quarterly dividend to 51 cents. The increased dividend represents an increase of 4% from 49 cents paid earlier.
The first increased dividend will be paid on Aug 13, 2013 to the shareholders of record on Jul 23, 2013.
On an annualized basis, ACE Limited will now pay a dividend of $2.04 per share, up from $1.96 per share. Previously, in May 2012, the board announced a 4.25% increase in the quarterly dividend to 49 cents ($1.96 on an annualized basis), up from 47 cents ($1.88 on an annualized basis).
ACE has had a consistent track record of paying quarterly dividends and the current dividend is not an exception. In addition, the company has a record of increasing its dividend every year. Its dividend yield is 2.23%, which is above the industry yield of 2.04%.
ACE appears to have a strong capital and liquidity position, helping it increase the quarterly dividend. The cash balance of ACE Limited at the end of first quarter totaled $855 million, up 39% from 2012 year-end level.
ACE Limited guided 2013 operating earnings to a band of $7.10–$7.50 per share, up from $6.60–$7.00 per share guided earlier. The Zacks Consensus Estimate for 2013 is $8.10, above the company guidance.
Over the last 7 days, there has been no earnings momentum. We expect that the dividend hike will encourage analysts to pull the estimates upward.
ACE Limited posted a strong first quarter, benefiting from solid underwriting performances. Both the U.S. and international business operations experienced growth and better margins. ACE Limited also benefited from improved commercial property & casualty (P&C) pricing environment. The company is well poised on the strength of its international presence, diversified product offering, risk management, conservative underwriting practice and strong reserves. ACE Limited remains focused to enhance its earnings, return on equity and book value per share.
ACE Limited currently carries a Zacks Rank #3 (Hold). Property and casualty insurers, AXIS Capital Holdings Limited (AXS - Analyst Report), Hilltop Holdings Inc. (HTH - Analyst Report) and Montpelier Re Holdings Ltd. (MRH - Analyst Report), among others carry a favorable Zacks Rank # 1 (Strong Buy) and appear impressive.