ACE Limited recently received the approval to increase its quarterly dividend by 24% at the extraordinary general meeting held on Jan 10, 2014.
ACE Limited will now pay a quarterly dividend of 63 cents ($2.52 on an annualized basis), up from 51 cents ($2.04 on an annualized basis) paid earlier. The increased dividend will be paid on Jan 31, 2014 to the shareholders of record on Jan 13, 2014.
In the past, ACE Limited has maintained a consistent track record of paying quarterly dividends and increasing its dividend payout each year. The current dividend hike is thus not an exception. Over the past 5 years, the company has increased its dividend at a CAGR of 15.2%. Earlier, In May 2013, the board had announced a 4% increase in quarterly dividend from 49 cents ($1.96 on an annualized basis).
Based on Friday’s closing price of $98.67, the company’s dividend yield is 2.55%, much above the sector average of 2.28%. The company intends to pay out around 30% of its operating earnings to its shareholders.
ACE Limited will pay the dividend from its capital contribution reserves that are duly supported by sustained solid operational performance at the company.
Besides continuous dividend increases, ACE Limited also aggressively buys back shares to boost its bottom line. Consistent with such efforts, last November, ACE Limited was authorized to repurchase $2 billion worth of shares through Dec 31, 2014. ACE Limited eyes repurchase of $1.5 billion worth of shares by 2014-end. The company repurchased $233 million or 2.7 million shares in the first nine months.
Several insurers have made dividend hikes with an intention to enhance shareholders’ value. Last month, the board of directors of Erie Indemnity Company (ERIE - Snapshot Report) approved a dividend hike on both Class A and Class B shares. While a 7.2% dividend hike was approved for Class A shares, a 3.2% hike was approved for Class B shares.
In Nov 2013, the board of directors of property and casualty Montpelier Re Holdings Ltd. increased its dividend by 9% to 12.50 cents per share. Yet another life insurer, American Equity Investment Life Holding Co. (AEL - Snapshot Report) approved a 20% increase in its annual cash dividend to 18 cents.
ACE Limited currently carries a Zacks Rank #2 (Buy).