Back to top

Image: Bigstock

Horace Mann (HMN) to Share More Profits, Raises Dividend

Read MoreHide Full Article

Horace Mann Educators Corporation’s (HMN - Free Report) board of directors approved a 3.2% hike in its quarterly dividend. This Zacks Rank #3 (Buy) insurer will pay 32 cents per share compared with 31 cents per share paid in December 2021.

This increased dividend translates to an annualized payout of $1.28 per share. Based on the stock’s Mar 7 closing price of $41.22, the new dividend will yield nearly 3.1%, better than the industry average of 2.2%. With 42.2 million shares outstanding at 2021 end, the company looks to allocate about $13.5 million quarterly to pay the dividend. Shareholders of record on Mar 17 will receive the meatier dividend on Mar 31.

The latest move marks the 14th consecutive yearly hike, reflecting operational excellence and commitment to return value to its shareholders. Its dividend witnessed a 14-year CAGR of about 14%. Its strategic focus on designing products to capitalize on the potential opportunity in the K-12 educator market, annuity reinsurance agreement, profitable in-force block, high quality and well-diversified investment portfolio, and cost-saving initiatives are likely to help Horace Mann increase dividends. HMN targets a 50% dividend payout ratio.

Apart from dividend hikes, HMN also engages in share buybacks and has bought back $86.9 million worth of shares since 2011. Solid operational performance driven by growth across all segments and continued share repurchases should help the insurer achieve its core earnings guidance of $3.45 to $3.65 per share in 2022.

Its solid financial foundation and operational performance will continue to generate capital, thereby aiding Horace Mann to engage in shareholder-friendly moves apart from investing in business growth at returns that meet or exceed its return on equity targets. The insurer estimates generating excess capital of $50 million annually. Horace Mann estimates generating core ROE of 10% in 2022 and double-digit core ROE over the long term.

Shares of Horace Mann have gained 6.5% year to date against the industry’s decrease of 2.2%. Transformational actions, profitability initiatives and niche market focus are likely to help shares trend higher.

Zacks Investment Research
Image Source: Zacks Investment Research

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 Chubb Limited (CB - Free Report) raised the dividend last month.

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. Chubb’s board proposed a dividend hike of 3.7%.

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 2.8% dividend yield betters the industry average of 0.3%, making the stock an attractive pick for yield-seeking investors. Allstate’s solid balance sheet supports effective capital deployment. Apart from financial strength, the deployable capital generated from the insurer’s divestiture of life and annuity businesses closed in November 2021 enabled Allstate to pursue robust capital deployment moves.

Chubb Limited’s dividend yield of 1.6% betters the industry average of 0.3%. 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.

Shares of Allstate and Chubb have gained 6.4% and 2.9% respectively year to date while that of Aon have lost 4.1% in the same time frame.

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