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Allstate (ALL) Boosts Shareholder Value With Dividend Hike

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The Allstate Corporation’s (ALL - Free Report) board of directors recently approved a 4.9% hike in the quarterly dividend in an effort to enhance shareholder value. ALL will now pay out a dividend of 85 cents per share compared with the prior payout of 81 cents.

Marking the 12th straight year of dividend hike, the increased dividend will be paid on Apr 1, 2022 to shareholders of record as on Feb 28.

Prior to the recent hike, Allstate had last raised quarterly dividend by a whopping 50% in February 2021.

The property & casualty (P&C) insurer has grown its dividends with a 12-year CAGR of 12.8%. Based on the stock’s Feb 18 closing price of $125.89, its dividend yield of 2.6% compares favorably with the industry’s figure of 0.4%.

Meanwhile, Allstate boasts a robust capital deployment history through share buybacks and dividend payments. Rewarding shareholders to the tune of over $13.7 billion over the past five years is a clear-cut indication of the same.

Apart from continuous dividend hikes, ALL actively engages in buying back of shares as part of its $5 billion share repurchase program.

ALL was able to sustain its sound capital deployment history in 2021 as well, wherein the company awarded shareholders with $4.1 billion. Included within this is share buybacks worth $3.3 billion or 11.8% of common shares outstanding. In addition to this, Allstate distributed common dividends worth $885 million last year. As of Dec 31, 2021, ALL had $3.3 billion was left under its $5 billion buyback program (likely to be completed by Mar 31, 2023).

It is worth mentioning that the total deployable capital of Allstate during 2021 was $1.7 billion higher than the figure of 2020. Apart from financial strength, the deployable capital generated from the company’s divestiture of life and annuity businesses closed in November 2021 enabled Allstate in pursuing such robust capital deployment moves.

If a company consistently raises dividends each year and continues to pursue regular 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. Allstate exited 2021 with a sturdy cash balance of $763 million, which more than doubled from the 2020-end level.

Return on equity, a profitability measure to identify how tactically the company is utilizing its shareholders’ funds, stands at 16.6% for Allstate, which is higher than the industry’s average of 5.6%.

Given a solid capital level of the insurance industry and improving operating backdrop favoring strong operational performance, other insurers like Prudential Financial, Inc. (PRU - Free Report) , RenaissanceRe Holdings Ltd. (RNR - Free Report) and W.R. Berkley Corporation (WRB - Free Report) resorted to tactical capital deployment moves throughout 2021.

Prudential returned capital worth $4.3 billion to shareholders via $2.5 billion in share buybacks and $1.8 billion through dividends. In February 2022, PRU approved a 4% hike in the quarterly dividend. In November 2021, Prudential authorized the repurchase of up to $1.5 billion of its outstanding shares during the period from Jan 1, 2022 through Dec 31, 2022.

RenaissanceRe bought back 6.6 million shares worth $1 billion and paid common dividends worth $67.8 million in 2021. As of Dec 31, 2021, RNR had $306.6 million left under its authorized share repurchase program. In February 2022, RenaissanceRe’s board of directors approved a 2.8% hike in first-quarter 2022 dividend. Concurrently, management sanctioned the renewal of its authorized share buyback program leading to the total current authorization of up to $500.0 million.

W.R. Berkley returned $478.1 million in capital to shareholders in 2021, which comprised $265.3 million of special dividends, $90.4 million of regular dividends and $122.4 million of share repurchases. In November 2021, WRB approved a special cash dividend of $1.00 per share, which marked the second special dividend approved by the board in the past year. W.R. Berkley’s board has increased share repurchase authorization back to its earlier level of 10 million shares, which seems noteworthy.

Price Performances

Shares of Allstate have gained 16.6% in a year compared with the industry’s rally of 14.2%.

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ALL currently has a Zacks Rank #5 (Strong Sell).

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

Shares of Prudential and W.R. Berkley gained 33.6% and 30.8%, respectively, in a year. Meanwhile, RenaissanceRe stock lost 5.3% in the same time frame.

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