Following a strong third quarter 2013 earnings performance, the board of directors of Prudential Financial Inc. (PRU - Free Report) approved a 32.5% increase in its quarterly dividend to 53 cents per share. The increased dividend will be paid on Dec 19, 2013 to shareholders of record as of Nov 26, 2013.
Share prices that have been rallying over the last few days were further aided by the recent development. Share price witnessed a hike of 0.2% to close at $86.64 on Tuesday.
With this increased payout, the life insurer’s dividend yield stands at 1.85%, comparing favorably with the industry yield of 1.51%. Prudential has been able to grow its dividend at a significantly better rate than the industry’s dividend growth rate. This is reflected in its 5–year dividend growth rate of 6.83% compared with -3.03% for the industry.
Prior to this, Prudential increased the annual dividend payment by 10% during third quarter 2012 earnings. It was then that the company also changed its dividend disbursements to quarterly intervals from annual payments.
This year another life insurer MetLife Inc. (MET - Free Report) also made a 49% hike in its quarterly dividend payments to 27.5 cents from 18.5 cents.
The dividend hike by Prudential was backed by its financial flexibility. It had balance sheet capital capacity of about $3.5 billion as of Sep 30, including about $1.5 billion ready for deployment.
Prudential has a good track record of systematically deploying capital through share repurchases, dividend payments and acquisitions. It also announced a new $1.0 billion repurchase authorization in June, which extends through Jun 30, 2014.
Prudential’s stock retains a Zacks Rank #2 (Buy). With the recent positive development, we expect more analysts to raise their estimates exerting upward pressure on the Zacks Rank.
Other insurers worth considering include Kemper Corp. (KMPR - Free Report) with a Zacks Rank #1 (Strong Buy) and Assurant Inc. (AIZ - Free Report) , with a Zacks Rank #2 (Buy).