Protective Life Increases Dividend (LFC) (PL) (PRU) (SFG)

Life insurer Protective Life Corp. (PL) has announced an 11% increase in its quarterly dividend. The new dividend of 20 cents per share will be paid on Jun 10, 2013 to share owners of record at the close of business on May 24, 2013.

Last year the company announced a dividend increase of 12.5%. At the increased level the company dividend yield stands at 2.0%, based on the closing price of $39.23 on May 15. This compares favourably with industry average of 1.5%

Protective’s increased dividend is backed by the company’s strong cash flows and a solid balance sheet. Sufficient financial flexibility has also enabled the company to return capital to its shareholders via share buyback.

Protective is one of the major players in the life insurance industry. It has been changing its sales mix to improve life insurance margins and reduce interest rate exposure.

We expect Protective to benefit from the changing demographic pattern in America where a large proportion of the population is aging. It thus generates greater demand for retirement savings products. We expect this trend will drive strong earnings growth in this business, given that Protective is already witnessing strong variable annuity sales and increased premium

Protective has a long history of successfully acquiring both closed blocks of business and small companies. It has been traditionally successful in generating operating efficiencies along with increasing business scale via these acquisitions. Going forward we expect more such deals to be sealed by the company, given sufficient cash in hand.

We believe its strong operating fundamentals will enable it to make increasing dividend payments to its shareholders in future.

Other players in the same field include StanCorp Financial Group (SFG) with Zacks Rank #1 (Strong Buy), China Life Insurance Co. Ltd. (LFC), Prudential Financial Inc. (PRU) both with Zacks Rank #2 (Buy), are worth considering.