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Humana (HUM) Okays Dividend Hike, Boosts Shareholder Value

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Humana Inc.’s (HUM - Free Report) board of directors recently approved a hike of 12.5% in the quarterly dividend in a bid to return more value to shareholders. With the announcement, the payout now stands at 78.75 cents per share compared with the prior payout of 70 cents.

Marking the sixth consecutive year of dividend increase, the meatier dividend will be paid on Apr 29, 2022, to shareholders of record as on Mar 31. Prior to the recent 12.5% hike, Humana had raised its quarterly dividend by 12% in February 2021.

HUM has been a regular dividend-paying company since 2011. Based on the stock’s Feb 17 closing price of $424.71, the new dividend will yield 0.7% to the company.

Apart from consistent dividend hikes, Humana boasts a sound share repurchase history. In 2021, apart from paying dividends worth $354 million, the healthcare provider bought back shares worth $80 million.

In February of last year, HUM’s board of directors approved a share repurchase program of $3 billion, which is set to expire on Feb 18, 2024. As part of the $3 billion buyback program, Humana inked separate accelerated stock repurchase (ASR) agreements with two third-party financial institutions in January 2022 to buy back $1 billion shares. Per the terms of the ASR, HUM received an initial delivery of shares, and buybacks worth roughly $150 million is left to be settled, which is likely to be completed in the first quarter of 2022. The company had $2 billion remaining under its current $3 billion share repurchase authorization as of Feb 1, 2022.

If a company consistently raises dividends each year and continues to pursue share buybacks, the scenario is indicative of the company’s sound liquidity position. This is important for not only relieving a company of debt-laden balance sheet risks and associated escalating interest expenses but also paves the way for accelerated capital deployment.

In fact, Humana seems to be an attractive stock to yield-seeking investors. The company resorted to prudent capital deployment moves throughout 2021, riding on a strong cash balance and adequate cash-generating abilities. HUM boasts a strong liquidity position. The company had cash and cash equivalents of $3.4 billion as of Dec 31, 2021, which is sufficient enough to cover its short-term debt obligations of $2 billion. Humana generated cash flow from operations worth $2.3 billion in 2021.

Shares of Humana have gained 12.7% in a year compared with the industry’s rally of 44.1%. HUM currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Some of the other healthcare providers like Cigna Corporation (CI - Free Report) , Anthem, Inc. and HCA Healthcare, Inc. (HCA - Free Report) resorted to tactical capital deployment moves throughout 2021.

Cigna returned capital of more than $9 billion to shareholders via share buybacks and dividends. Recently, CI’s board of directors approved a 12% hike in the quarterly dividend. It also declares special dividends from time to time. In the third quarter of 2021, Cigna announced accelerated share repurchase agreements to buy back $2 billion of common stock.

Anthem bought back 5.1 million shares worth $1.9 billion in 2021. As of Dec 31, 2021, ANTM had $4.2 billion left under its authorized share repurchase program. Over the past year, cash dividends amounting to $1.1 billion were paid. In January 2022, Anthem’s board of directors approved a 13% hike in the quarterly dividend.

HCA Healthcare returned capital in the form of $8.2 billion in share repurchases and dividends worth $624 million. As of Dec 31, 2021, the company had $586 million left under its repurchase authorization. In January 2022, HCA Healthcare sanctioned a hike of 16.7% in its quarterly dividend. Its board of directors has increased share repurchase authorization for up to $8 billion.

Shares of Cigna, Anthem and HCA Healthcare have gained 11.2%, 53% and 41.4%, respectively, in a year.

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