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Unum (UNM) to Share More Profit, Okays 5.3% Hike in Dividend

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In its efforts to share more profits with shareholders, the board of directors of Unum Group (UNM - Free Report) approved a 5.3% increase in its dividend. With this, the payout now stands at 30 cents per share compared with 28.5 cents per share paid on May 21.

Based on the stock’s May 28 closing price of $30.97, the new dividend will yield 3.9%, better than the industry average of 2%. With 204.7 million shares outstanding, this Zacks Rank #3 (Hold) insurer would need about $61.4 million quarterly to pay the dividend. Shareholders will receive the meatier dividend in the third quarter of 2021.

Prior to the recent hike, the company had increased dividend in 2019 by 11.5%, marking the 11th consecutive year of dividend hike. This leading disability income writer and the second-largest writer of voluntary business in the United States’ dividend witnessed a 12-year CAGR of 12.2%. Unum’s conservative pricing, growth of product lines and improving premium, favorable benefits experience and sturdy capital position should help the company retain the momentum.

Over the last 10 years, Unum has prudently shifted its business mix by increasing proportion of voluntary products, adding Dental and Vision, and divesting Closed Disability Block. Management remains focused on moving on to a mix of businesses with higher growth and stable margins.

Unum Group boasts a solid capital position. Sustained solid operating results have been fueling a solid level of statutory earnings and capital, cushioning financial flexibility. Strong statutory earnings might provide an impetus to strong dividend capacity. The company also buys back shares as part of its capital management strategy.

Shares of Unum Group have rallied 35% year to date, outperforming the industry’s rise of 23%. High persistency levels and strong sales volume and solid benefits experience should help it retain the momentum.

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Among other insurers, Chubb (CB - Free Report) , RLI Corp. (RLI - Free Report) and Radian Group (RDN - Free Report) hiked their quarterly dividend by 2.6%, 4.1% and 12%, respectively.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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