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Chubb (CB) Board Looks to Recommend Dividend Hike of 3.7%

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The board of directors of Chubb Limited (CB - Free Report) is set to propose a 3.7% increase in the annual dividend at the annual general meeting. This hike, if approved, will mark the 29th consecutive dividend increase by one of the world’s largest providers of property and casualty (P&C) insurance and reinsurance and largest publicly traded P&C insurer, based on market capitalization.

On approval of the same, Chubb will pay out a quarterly dividend of 83 cents ($3.32 on an annualized basis) compared with the current dividend of 80 cents ($3.20 on an annualized basis).

Concurrently, the board of directors also declared a quarterly dividend of 80 cents per share. The dividend will be paid out on Apr 8 to shareholders of record as of Mar 18.

Prior to the recent hike, Chubb had raised the quarterly dividend by 2.6% to 80 cents per share last year in May.

Chubb has a stellar track record of paying quarterly dividends and raising its dividend payout each year. Chubb has more than doubled its quarterly dividend since 2010, reflecting sustained solid operational performance. Based on the closing price of $199.03 as of Feb 24, the insurer’s dividend yield is 1.6%, much above the industry average of 0.3%. Notably, Chubb’s dividends have witnessed an eight-year CAGR (2014-2021) of 6.1%.

Chubb returned over $6 billion to shareholders or 112% of earnings, including $1.4 billion in dividends and $4.9 billion in share repurchases in 2021.

Apart from continuous dividend increases, Chubb aggressively buys back shares to boost its bottom line. In 2021, CB repurchased shares worth $4.9 billion. Subsequently, from Jan 1, 2022 through Feb 23, 2022, the insurer repurchased shares worth $405 million and has $2.24 billion remaining under authorization through Jun 30, 2022.

Chubb has maintained a strong balance sheet and financial flexibility, including consistent cash flow generation, for the past many years. The insurer’s cash flow has been increasing over the years. This has paved the way for prudent capital deployment measures. CB had $1.6 billion cash balance at the end of fourth-quarter 2021.

Return on equity, a profitability measure to identify how tactically a company is utilizing its shareholders’ funds, was 9.4% for Chubb in 2021, up 350 basis points year over year.

Shares of this Zacks Rank #2 (Buy) property and casualty insurer have outperformed the industry in the past year. The stock has gained 24.3% compared with the industry’s growth of 13.9%. Chubb’s strategic endeavors to drive growth, impressive inorganic story and efficient capital management strategies should help the stock sustain momentum.

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Given the solid capital level of the insurance industry and improving operating backdrop favoring strong operational performance, insurers like Aon plc (AON - Free Report) , The Allstate Corporation (ALL - Free Report) and RenaissanceRe Holdings Ltd. (RNR - Free Report) have resorted to effective capital deployment to enhance shareholders’ value in February 2022.

While Aon hiked its dividend by 10% and approved a new $7.5-billion share buyback program, Allstate’s board approved a 4.9% hike in its annual dividend. RenaissanceRe’s board approved a hike of 2.8%.

Aon’s current dividend yield is 0.7%. A robust liquidity standing backed by a strong balance sheet and solid cash flows have enabled Aon to support not only growth initiatives such as buyouts and collaborations but have also paved the way for accelerated and prudent capital deployment measures.

Allstate’s 2.7% dividend yield betters the industry average of 0.3%, making the stock an attractive pick for yield-seeking investors. Allstate’s robust balance sheet supports effective capital deployment. Apart from financial strength, the deployable capital generated from the company’s divestiture of life and annuity businesses closed in November 2021 enabled Allstate to pursue such robust capital deployment moves.

RenaissanceRe Holdings’s dividend yield of 0.9% betters the industry average of 0.3%. With a sound liquidity position, it has become easier for RenaissanceRe to mitigate balance sheet risks and undertake accelerated capital deployment moves. Continued share buybacks are expected to provide a boost to RNR’s bottom line.

Shares of Aon and The Allstate have gained 26.5% and 13.3%, respectively, whereas RenaissanceRe has lost 10% in a year’s time.

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

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