Yesterday, ProAssurance Corporation (PRA) announced the commencement of its cash dividend policy. For the first time since inception, the company will pay a quarterly dividend of 25 cents per share. Alongside, the company also declared that the first quarterly dividend will be paid on October 13, 2011 to shareholders on record as of September 29, 2011.
However, the dividend policy, which involves a payment of $1 per share annually, is not obligatory. The board of ProAssurance will study the company’s financials and its future outlook before taking a final decision about future dividend payments.
We believe that the dividend policy coupled with ProAssurance’s ongoing share repurchase program will boost investors’ confidence, thereby resulting in increased shareholders' value. ProAssurance repurchased 258,821 shares of its common stock in the first half of the year for about $15.0 million. The company has approximately $194 million left under its $200 million share repurchase program authorized in November 2010.
Additionally, ProAssurance has adequate cash balance to fund the dividend payment. The company generated operating cash flows of $28.2 million in the second quarter of 2011, showing a slight increase from $28.1 million generated in the prior-year quarter. Hence, a gradual and steady improvement in earnings and cash flow will enhance ProAssurance’s overall market position.
Earnings Review
ProAssurance reported second-quarter 2011 operating earnings of $53.7 million or $1.74 per share, which surpassed the Zacks Consensus Estimate of $1.26.
The Zacks Consensus Estimate of earnings is currently $1.29 per share for the third quarter of 2011, down 0.58% year-over-year. Of the 8 firms covering the stock, none have revised their estimates in the past 30 days.
For 2011, ProAssurance’s earnings are expected to be $6.29 per share, showing a steep decline of 7.83% from 2010.
ProAssurance carries a Zacks #1 Rank, implying a Strong Buy rating for the near term. The company primarily competes with Berkshire Hathaway Inc. (BRK.A)and MontpelierRe Holdings Ltd. (MRH).
On Wednesday, the shares of ProAssurance closed at $72.14, up 3.2%, on the New York Stock Exchange.
BERKSHIRE HTH-A (BRK.A): Free Stock Analysis Report
MONTPELIER RE (MRH): Free Stock Analysis Report
PROASSURANCE CP (PRA): Free Stock Analysis Report
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