Unum Group (UNM) remains steadfast in its commitment to return shareholder value. In this regard, its board of directors recently authorized an increase of 13.5% in its quarterly dividend. The increased dividend of 10.5 cents per share is expected to be paid in the third quarter of 2011. The company hiked the dividend from 9.25 cents a share paid on May 20, 2011.
The latest dividend hike marks Unum’s third consecutive year of quarterly dividend increase. Previously, Unum increased its quarterly dividend by 12.1% in 2010 and 10% in 2009. The company’s dividend yield is 1.43%, much higher than that of its peers Lincoln National Corp. (LNC), which yields 0.70% and CIGNA Corporation (CI) that has a yield of 0.08%.
Unum has strong liquidity to support its dividend increase. The company ended the first quarter with cash and bank deposit of $56.6 million (up 9.5% year over year) and cash from operations of $301 million (up 6.9% year over year).
Apart from hiking dividend, Unum buys back shares in an effort to enhance shareholders value. Unum Group spent $223.6 million to buy back 8.6 million shares during the first quarter 2011. As of March 31, 2011, the company had approximately $920.7 million remaining under its $1.0 billion share repurchase authorization.
Unum reported first-quarter operating income of 69 cents per share, a penny lower than the Zacks Consensus Estimate. Soft performance at Unum UK and Individual Disability – Closed Block resulted in lower-than-expected results.
At its earnings conference call, Unum Group guided operating income per share to grow in the range of 6% to 12% for 2011.
The Zacks Consensus Estimate for second-quarter 2011 is 72 cents per share. For full years 2011 and 2012, the Zacks Consensus Estimates are a respective $2.93 and $3.29.
We maintain our long-term “Neutral” recommendation on Unum Group. The quantitative Zacks #3 Rank (short-term Neutral rating) for the company indicates no clear directional pressure on the shares over the near term.
Headquartered in Chattanooga, Tennessee, Unum Group was created following the June 1999 merger of Provident Companies Inc. and Unum Corporation. Along disability insurance, the company provides long-term care insurance, life insurance, employer- and employee-paid group benefits and related services.
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