In an effort to share more profit with investors, the board of directors of Assurant, Inc. (AIZ - Free Report) recently increased its dividend by 6% and approved a share buyback program worth $600 million. The approval is in tandem with the company’s effort to pay back $1.5 billion to its shareholders by year-end 2017. Shares of the company gained about 3.64% following the announcement, reflecting investors’ optimism.
The company will now pay a quarterly dividend of 53 cents per share as against 50 cents paid on Sep 13. Shareholders on record as of Nov 28 will have the meatier dividend in their pockets on Dec 12, 2016. With the increase the annualized rate comes to $2.12 per share. Based on the closing share price of $86.01 as of Nov 14, the increased payout implies a dividend yield of 2.5%, which is better than the industry average of 1.87%. Assurant has a solid track of increasing its dividend each year. The company has grown its dividend at a five-year CAGR of 27%. The recent dividend hike marks 14th straight dividend increase by the company.
Concurrently, the board authorized the company to buy back up to $600 million worth shares. Assurant now has $753 million remaining under its authorization. The multiline insurer has already repurchased shares worth $894 million this year. Since its initial public offering in 2004, the company bought back 93 million shares for $4.4 million or 66% of its common shares outstanding.
Assurant has a strong capital management policy in place. The company’s initiatives are well supported by its solid cash flow generation, which in turn is driven by sustained solid operational performance.
However, we note that this Zacks Rank #5 (Strong Sell) insurer missed expectations as well as showed a year-over-year decline in the third quarter of 2016. Also, the Zacks Consensus Estimate have been trending south over the last few weeks. Hence, the company’s announcement of the divided hike and share buyback program at this point in time appears to be a prudent move to retain investor confidence in the company.
Recently, the board of directors of RLI Corp. (RLI - Free Report) approved a special cash dividend of $2.00 per share, while W. R. Berkley Corporation (WRB - Free Report) announced a special dividend of 50 cents to enhance shareholders’ value.
Stocks to Consider
A better-ranked multiline insurer is Prudential Financial, Inc. (PRU - Free Report) , which sports a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Prudential offers an array of financial products and services including life insurance, annuities, retirement-related services, mutual funds, investment management and real estate services.
Following the earnings outperformance in the third quarter, the Zacks Consensus Estimate moved north by 1.4% for 2016.
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