The board of directors of Principal Financial Group, Inc. (PFG) approved a new share buyback program in a concerted effort to return more value to shareholders. The new approval authorizes the company to repurchase shares worth $150 million.
Share repurchases benefit the company’s earnings per share, book value and shareholder equity, as these reduce the number of shares outstanding.
A solid liquidity position driven by sustained operational strength has always supported Principal Financial in capital deployment. In 2014, the investment manager generated $3.1 billion in cash (up 40% year over year) and exited the year with retained earnings of $6.1 billion (up 13% year over year).
In 2014, Principal Financial returned $599.3 million to its shareholders, via dividend payment and share repurchases, increasing 36% year over year. Share buyback totaled $223 million last year.
Principal Financial’s capital deployment through share buybacks and dividend payment looks impressive, making it an attractive pick for yield-seeking investors. As such the investment manager intends to deploy $0.8–$1 billion in share buybacks and dividend payment besides strategic acquisitions.
Riding on the strength of its operational performance, its board of directors also approved a 6% increase in quarterly dividend. The quarterly dividend of 36 cents per share translates into an annualized payout of $1.44 per share, currently yielding 2.8%, and betters the industry average of 1.52%.
Principal Financial also boasts a track of positive surprise every quarter with the last four-quarter surprise averaging 9.81%. The strength seen in last quarter’s financial performance was backed by its increased focus on fee-based businesses.
Currently, Principal Financial carries a Zacks Rank #3 (Hold). Better-ranked investment managers include AllianceBernstein Holding L.P. (AB), Ameriprise Financial, Inc. (AMP) and Janus Capital Group, Inc. (JNS). All these stocks carry a Zacks Rank #2 (Buy).
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