The board of directors of The Hanover Insurance Group Inc. (THG) approved an 11% dividend hike, signaling intentions to share more profits with shareholders. The company will now pay a quarterly dividend of 41 cents per shares, up from its earlier payout of 37 cents.
The shareholders of record on Dec 15 will receive the increased dividend on Dec 26. Based on the closing share price of $72.14 on Friday’s trading session, the increased dividend implies a yield of 3.1%, much above the industry average of 2.3%. Hanover Insurance has a track record of increasing dividend every year. Its dividend has grown at a 4-year CAGR of about 13.2%. The last dividend hike was approved in December 2013 with the board approving a 12% increase.
Based on 44.9 million shares outstanding at the end of the third quarter, Hanover Insurance Group will have to dish out around $18 million as quarterly dividend. Its liquidity position is sound enough to support the payout. While the cash balance at third-quarter end improved to $509.6 million (improving 4.8% from December 2013), retained earnings stood solid at nearly $1.5 billion at quarter end (improving 10.4% from December 2013). Cash from operations shot up 124% year over year to $408.1 million in the first nine months of 2014. Its solid liquidity is supported by the company’s sustained operational results. The insurer delivered four straight quarters of positive surprises, with an average beat of 15.2%.
Aside from Hanover Insurance Group, other insurers that have decided to share more profits with shareholders include Erie Indemnity Company (ERIE), AXIS Capital Holdings Limited (AXS) and Everest Re Group Ltd. (RE). While the board of directors of Erie Indemnity approved a 7.2% dividend hike, AXIS Capital approved a 7.4% hike. Last month, the board of directors of Everest Re Group Ltd. (RE) approved a 27% increase in dividend.
Concerted efforts on the part of the companies to share more profit with shareholders not only retain investor confidence, but also help in attracting more investors to the stocks, besides testifying to its solid operational results.
Hanover Insurance currently carries a Zacks Rank #2 (Buy).
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