Unum Group (UNM) Increases Dividend, Okays Share Buyback
Zacks Investment Research | May 25, 2017 10:22PM ET
In its concerted effort to enhance shareholder value, the board of directors of Unum Group (NYSE:UNM) recently hiked its quarterly dividend by 15% and approved a new $750 million share buyback program. Shares gained 0.02% in the trading session on May 25, reflecting investor optimism.
The new dividend payout amounts to 23 cents per share as against 20 cents paid earlier. The annualized dividend of 92 cents per share yields 2%, based on the closing price of $45.40 as of May 25. Shareholders are expected to have the meatier dividend in their pockets in the third quarter of this year.
Unum Group has an impressive track of raising dividends each year. While the latest hike marks the ninth straight year of increase. In fact, this Zacks Rank #3 (Hold) accident and health insurer has increased dividends at a 10-year CAGR of 11%.
Apart from dividend increases, Unum engages in share buybacks to lower the share count and boost the bottom line. To that end, the board of directors authorized the company to repurchase up to $750 million share through Nov 25, 2018. The new program replaces the previous $750 million program, which is scheduled to expire on Nov 26, 2017.
With $100 million spent on buying back 2.1 million shares in the first quarter, Unum Group has repurchased $3.7 billion worth shares since the fourth quarter of 2007. The insurer’s concerted efforts to enhance shareholders’ value make its stock an attractive pick for yield-seeking investors.
A sturdy financial position, backed by continued solid operational performance by core operations, enables the company to generate enough capital. This in turn positions it well to increase its payouts or engage in other shareholder-friendly moves. Unum is decently liquid with cash from operations of $308 million in the first quarter (up 5% year over year). It also retained earnings at a solid $9.1 billion (up 2.1% from year-end 2016).
Shares of Unum Group have gained 3.32%, outperforming the Accident and Health insurance industry’s gain of 5.32%. However, we believe the company’s strategic endeavors to enhance shareholders’ value will not only make it an attractive pick for yield seeking investors but also drive shares higher.
Dividend hikes and share repurchases seem to be a well-accepted strategy among insurers to solidify investor confidence on their stock. The board of directors of Chubb Limited (NYSE:CB) recently announced a 3% hike in quarterly dividend to 71 cents per share. W.R. Berkley Corporation (NYSE:WRB) approved a 7.7% hike in its quarterly dividend as well as a special dividend of 50 cents per share. Principal Financial Group, Inc. (NYSE:PFG) approved the repurchase of shares of up to $250 million.
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