In a bid to return more value to its shareholders, the board of directors of First American Financial Corporation (FAF Quick QuoteFAF - Free Report) recently approved an 11.8% hike in its quarterly dividend. The company will now reward investors with a dividend of 38 cents per share compared with 34 cents paid on Jun 15, 2017. Shares gained 1.03% in the last trading session, reflecting investors’ appreciation of the company’s shareholder-friendly move.

 

Shareholders on record of Sep 8, will have the meatier dividend in their pockets on Sep 15. Based on the closing share price of $49.04 as of Aug 16, the increased payout translates into a dividend yield of 3.1%, better than its industry’s average of 2.6%.

 

Backed by its operating strength, this Zacks Rank #1 (Strong Buy) property and casualty insurer has a solid track record of increasing dividend each year. The company has witnessed a 5-year CAGR (2012-2017) of 36.56% in dividend payout.

 

With about 112.2 million shares outstanding at the end of the second quarter, the company has to dish out about $42.6 million quarterly or $170.5 million annually as dividend. The payout is supported by the company’s strong capital position. 

 

According to chief executive officer Dennis J. Gilmore, the increase in the company’s dividend instills confidence among investors in the long-term objectives of its business. This also portrays the company’s intention to offer steadfast returns to its shareholders.

 

First American Financial has a strong capital management policy in place. Its commitment toward increasing dividend regularly makes the stock an attractive to yield-seeking investors.

 

The company’s initiatives are supported by its solid cash flow generation, which in turn, is driven by consistent operational strength. The company’s cash balance as of Jun 30, 2017 was $116 million (up 16% from the year end 2016) and cash flow from operations was $234.6 million in the first six months of 2017 (up 60.3% year-over year). By virtue of its intelligent capital management, the company returned 26.8% to its investors from 2012 to 2016. 

 

Several insurers reward their shareholders with dividend hikes. Recently, United Fire Group Inc. (UFCS Quick QuoteUFCS - Free Report) increased its dividend payout by 12% to 28 cents per share.