Shares of Montpelier Re Ltd. (MRH) have been trending upward following the announcement of 60% dividend increase by property and casualty insurer on Jul 30. Shares gained 0.3% to close at $29.58 on Friday.
The increased dividend of 20 cents will be paid on Oct 15 to shareholders of record on Sep 30. The new annualized dividend of 80 cents per share yields 2.70% based on the closing price of $29.58 on Aug 1 and outperforms the industry average of 2.30%.
The recent hike marks the sixth consecutive increase by Montpelier Re. Last November, the board approved a 9% increase in its quarterly dividend to 12.50 cents. The company increased its dividend at a 6-year CAGR of about 18%.
Based on about 47.8 million shares outstanding on Jun 30, 2014, Montpelier Re needs to dish out about $9.6 million as quarterly dividend. Its solid liquidity supports the payout quite well. The company ended the second quarter with cash and equivalents of $597.3 million (up 8% year over year) while retained earnings stood at a solid $729 million (up 45% year over year).
Apart from dividend increase, Montpelier Re also buys back shares that lowers the share count and in turn increases shareholders value. Subsequent to the end of second quarter to date, the company has already bought back 0.3 million shares.
Montpelier Re, in the second quarter, missed the Zacks Consensus Estimate and year-ago earnings on lower underwriting income. Following the earnings miss, the Zacks Consensus Estimate has declined 4.5% to $3.59 for 2014 and 1.2% to $3.09 for 2015 as half of the estimates moved south in the last 7 days.
However, the quarter witnessed solid contribution from Lloyd’s and Collateralized Re segments, as well as benefit of prior-period development.
We expect the move by Montpelier Re to enhance its shareholders value and encourage analysts to raise their estimates, exerting upward pressure on the Zacks Rank. The stock presently carries a Zacks Rank #3 (Hold).
Other insurers that have increased their dividend include ACE Ltd. (ACE) which approved a dividend hike of 3% to 65 cents per share, Unum Group (UNM) which announced a 14% hike in the quarterly dividend to 16.50 cents per share, and United Fire Group Inc.. (UFCS) which hiked its quarterly dividend by 11% to 20 cents per share.
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