In a bid to enhance shareholder value, the board of directors of Unum Group (UNM - Free Report) recently hiked its quarterly dividend by 13% and approved a new $750-million share buyback program.
The new dividend payout amounts to 24 cents per share compared with 23 cents paid earlier. The annualized dividend of $1.04 per share yields 2.7%, based on the closing price of $38.54 as of May 24. Shareholders are expected to be awarded with the meatier dividend during the third quarter of 2018.
Unum Group boasts an impressive track record of annual dividend raises. The latest hike marks the 10th straight year of increase, translating into a staggering 247% rise over a decade. This Zacks Rank #3 (Hold) accident and health insurer’s dividend yield betters the industry average of 1.9%. Also, given its financial position and lower financial leverage compared the industry’s tally, the trend of continuous hikes is likely to sustain for good.
Apart from dividend increases, Unum Group engages in share repurchases to lower the share count and boost its bottom line. To that end, the board of directors authorized the company to buy back up to $750 million shares through Nov 24, 2019. The new program replaces the previous $750-million program, scheduled to expire on Nov 25, 2018.
With $100 million spent on buying back 2.1 million s hares in the first quarter of 2018, Unum Group has repurchased $3.4 billion worth shares since the fourth quarter of 2008. The company estimates a $400-million share buyback this year. The insurer’s concerted efforts to add shareholder value make its stock an attractive pick for yield-seeking investors.
A sturdy financial position, backed by a consistent solid operational efficiency by core operations, enables the company to generate enough capital. A lower tax rate is also providing additional cushion. This in turn places it well to augment its payout momentum or engage in other shareholder-friendly moves.
Shares of Unum Group have lost 29.2% compared with the industry’s decline of 4.4%. However, we believe that the company’s leading status as a writer of voluntary business in the United States, its conservative pricing and reservation practices plus strategic endeavors to boost shareholder value will likely help rebound the shares.
Dividend hikes and share repurchases seem a well-accepted strategy to solidify their investor confidence in the stock. In fact, post the tax rate revamp, tax incidence of the companies has been lowered, driving earnings and widening scope for more capital deployment. Evidently, the board of directors of Chubb Limited (CB - Free Report) recently announced a 3% hike in quarterly dividend. Also, CNO Financial Group, Inc. (CNO - Free Report) raised its quarterly dividend by 11% while United Fire Group Inc. increased the same by 10.7%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>