American Equity Rewards Investors With 9% Dividend Hike

In an effort to share more profit with investors, the board of directors of American Equity Investment Life Holding Company (NYSE:AEL) recently increased its dividend by 9%. The company will now pay an annual dividend of 24 cents per share as against 22 cents paid last December.

Shareholders on record as of Dec 5, will have the meatier dividend in their pockets on Dec 20, 2016. Based on the closing share price of $21.61 as of Nov 18, the increased payout translates to a dividend yield of 1.1%. American Equity Investment is known for increasing its dividend each year since its IPO in 2003. The company has grown its annual dividend at a CAGR (compound annual growth rate) of 27.7%, which marks the 13th straight increase.

With about 88.1 million shares remaining, the company has to dish out $21.1 million as dividend. We believe that American Equity Investment’s solid financial position will continue to support dividend payouts like this going forward. Cash from operations increased more than thirteen fold through the first three quarters, while cash and cash equivalents more than doubled at the end of Sep 2016.

However, we note that this Zacks Rank #3 (Hold) insurer missed expectations as well as declined year over year in the third quarter of 2016. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Also, the Zacks Consensus Estimate have been trending south over the last few weeks. Hence, the company’s announcement of the divided hike at this juncture appears to be a prudent move to retain investor confidence.

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. (NYSE:AIZ) increased its dividend by 6%, while that of Everest Re Group, Ltd. (NYSE:RE) approved a 9% hike in its quarterly dividend. RLI Corp. (NYSE:RLI) announced a special dividend of $2.00 to enhance shareholders’ value.

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