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Everest Re to Reward Shareholders With 9% Dividend Hike

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In its concerted effort to share more profit with shareholders, the board of directors of Everest Re Group, Ltd. approved a 9% hike in its quarterly dividend. The company will pay now a dividend of $1.25 per share as against prior payout of $1.15 per share.

Shareholders on record as of Nov 30, will receive the meatier dividend on Dec 14, 2016. Based on the closing price of $203.07 on Nov 16, the annualized dividend of $5.00 per share currently has a yield of 2.46%, which is above the sector average of 2.25%.

Everest Re has a track record of raising its dividend payout. The last hike was approved in Nov 2015, when the company had increased its dividend by 17% to $1.15 per share.

We note that the regular hikes in dividend are supported by the company’s strong financial position, which is cushioned by its sustained solid operational performance. The company generated $276.3 million from operating activities in the third quarter (up 2.3% year over year) and had cash balance of $435.8 million (up 53% from the 2014-end level).

This apart, the company engages in share buybacks to enhance shareholders’ value. Year to date, the company has repurchased about $386 million worth shares in 2016 and now has 2 million shares available for repurchase. We expect the company’s disciplined capital management and strong capital balance to keep facilitating these investor-friendly initiatives, going forward.

To its credit, the property and casualty insurer delivered positive surprises in three of the last four quarters, with an average beat of 25.6%. In the last reported quarter, Everest Re outpaced the Zacks Consensus Estimate by 43.2%.

We believe that a disciplined underwriting culture, impressive capital management as well as a conservative and high-quality balance sheet bode well for the company’s long-term growth and operating results. Everest Re’s dividend growth track would also be benefited by its strong fundamentals.

Dividend hikes not only testify to the operational and financial strength of a company, but also make a stock attractive for yield-seeking investors. Recently, the board of directors of Assurant, Inc. (AIZ - Free Report) increased its dividend by 6%. 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.

Everest Re currently carries Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

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