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American Equity (AEL) to Share More Profits, Ups Dividend by 6%

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In its concerted efforts to enhance shareholder value, the board of directors of American Equity Investment Life Holding Company (AEL - Free Report) approved a 6% hike in its annual dividend. This marked the 17th straight year of dividend hike. With this, the payout now stands at 32 cents per share compared with the earlier payout of 30 cents per share.

Based on the stock’s Aug 14 closing price of $27.20, the new dividend will yield 1.2%. With 91 million shares outstanding, this premier fixed-index annuity producer in the independent agent channel looks to allocate about $29.1 million to pay the dividend. Shareholders of record on Nov 25, 2020 will receive the meatier dividend on Dec 10, 2020.

Since the company went public in 2003, it has increased dividend each year, reflecting operational excellence and the company’s commitment to return value to its shareholders. The company’s dividend witnessed a 17-year CAGR of 22.6%.

Effective capital deployment by the company is supported by its balance sheet that has strengthened with increasing cash balance and improving debt to capital ratio. On Oct 18, 2020, the board of directors approved a $500 million share buyback program. The company has resumed repurchases since Oct 30, 2020 and expects to launch an accelerated share repurchase program in the fourth quarter of 2020.

Moreover, return on equity, a profitability measure to identify how efficiently the company is utilizing its shareholders fund, has been improving over the last several years. It generated average operating return on equity of 15% over the past years and targets the same between 11% and 14% over the next few years and above 15% on average over the long term.

Shares of American Equity have lost 9.1% year to date compared with the industry’s decrease of 14.6%. Compelling portfolio of fixed index and fixed rate annuity products, increasing popularity of index products, competitive rates and strong balance sheet should help shares bounce back.


 

The company carries a Zacks Rank #4 (Sell).

Recently, Assurant’s (AIZ - Free Report) board of directors approved a 5% hike while the board of directors of RLI Corp. (RLI - Free Report) approved a special cash dividend of $1.00 per share.

Stock to Consider

A better-ranked stock from the insurance space is Alleghany (Y - Free Report) , sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank.

Alleghany delivered an earnings surprise of 195.85% in the last reported quarter.

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