Unum Group’s (UNM Quick QuoteUNM - Free Report) board of directors recently approved a 10% hike in its dividend to $1.84 per share or 46 cents per share quarterly. The meatier dividend will be paid out in the third quarter of 2025. 

The company’s existing dividend yield of 2.1% is better than the industry average of 2%, which makes the stock an attractive pick for yield-seeking investors.

An Effective Capital Deployment Instills Confidence in UNM

Unum Group has an impressive history of deploying capital that includes distributing wealth to shareholders via dividend raises and share buybacks. It is supported by a strong capital and liquidity position that is backed by cash flow generation. 

This recent dividend hike marks the 16 dividend increase in last 15 years. Dividend has increased at a 10-year CAGR of 10.8%. In 2025, it estimates a dividend payout of $300-$330 million. 

Also, Unum Group has been continually buying back its shares, which, in turn, has boosted its bottom line over time. In the first quarter of 2025, Chubb repurchased $200 million worth of shares and expects to buy back at least the same amount in the second quarter. Notably, in February 2025, its board of directors approved a buyback program worth $1 billion beginning on April 1, 2025. The company now expects to buy back $0.5-$1 billion in shares in 2025.

Sufficient cash-generation capabilities, backed by sustained operational excellence, should continue to support wealth distribution to shareholders and drive growth initiatives. 

The Case for Unum Group

Unum Group is ranked as the leading disability income writer and the second-largest writer of voluntary business in the United States. The company has consistently reported strong operating performance across its key insurance segments, supported by efficient execution, favorable claims trends, and healthy top-line growth in its core business areas. UNM’s prudent pricing and reserving strategies have been central to sustaining its profitability over time.

The company’s two primary divisions — Unum U.S. and Colonial Life — have demonstrated ongoing growth in operating income. Unum U.S. continues to benefit from disciplined sales efforts, strong persistency in group lines, and the expansion of product offerings, such as dental and vision coverage. 
Colonial Life has seen growth fueled by increasing premium income and positive risk experience. Management remains focused on moving on to a mix of businesses with higher growth and stable margins.

Leveraging operational strength, Unum Group forecasts high-single-digit sales growth and 4% to 7% premium growth over the long term. For 2025, Unum Group expects its earnings to grow between 6% and 10%.

Thanks to its consistent performance, UNM maintains a robust capital position. Continued strong statutory earnings and capital generation provide the company with solid financial flexibility and long-term stability.

The company’s return on equity stands at 14.2%, lagging the industry average of 15.5%.

Price Performance and Stock Valuation

Shares of UNM have gained 6.5%, outperforming its industry’s growth of 2%, the sector’s return of 3.9% and the Zacks S&P 500 composite's decline of 1.2%. 

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Unum Group shares are presently expensive. Its price-to-book multiple sits at 1.24, above its median of 0.87 over the last five years.

Image Source: Zacks Investment Research

UNM shares are expensive than those of other insurers, such as Prudential Financial Inc (PRU Quick QuotePRU - Free Report) and Lincoln National Corporation (LNC Quick QuoteLNC - Free Report) .

How to Play UNM Stock

Unum Group is poised to grow on the operational excellence of Unum U.S. and Colonial Life. Encouraging sales trends, strong persistency in group lines and growth of new product lines like dental and vision, coupled with favorable risk results, should benefit Unum U.S. and Colonial Life, the two largest operating segments. It has an impressive dividend track record.

Based on short-term price targets offered by 14 analysts, the Zacks average price target is $92.36 per share. The average suggests a potential 16% upside from the last closing price.

However, the consensus estimate for 2025 and 2026 earnings has moved 0.7% and 0.6% south, respectively, in the past 30 days, reflecting analysts’ muted sentiment. 

Given its premium valuation, a projected decline in the bottom line in 2025, analysts’ muted sentiment, and unfavorable leverage and times interest earned, we prefer to remain cautious on this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.