Property and casualty insurer, Chubb Corp. (CB) has announced a 13.6% hike in its quarterly dividend payment. The increased dividend of 50 cents per share will be paid on Apr 1, 2014 to shareholders of record on Mar 14.
This increase marks the 32nd consecutive dividend hike, indicative of the company’s financial strength and resilience in a cyclical industry. Chubb has been paying cash dividends to shareholders each year since 1902, as a testimony to the company’s solid liquidity and solvency position (Chubb’s debt to capital ratio has traditionally stayed below 20.0%).
Prior to this, the company had increased its dividend by 7.3% in the first quarter of 2013.
Chubb’s dividend yield stands at 2.04%, a tad below the industry dividend yield of 2.12%. However, the company’s 5-year average dividend growth rate of 2.23% is higher than that of the industry growth rate of 1.95%.
Chubb Corp. – one of the largest U.S. property-casualty insurers, has carved out its niche in high-end personal lines and specialty liability lines of coverage. It is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers Index. We are impressed with Chubb’s commitment to pay rewards to its shareholders increasingly every year, irrespective of the difficult market conditions that plague the company’s performance. Going forward, we expect the company to keep moving on this dividend track, aided by improving industry fundamentals which should place the company in a more comfortable position financially.
Moreover, over the past ten years, the company has kept its dividend payout below 50% (except in 2001 and 2002). This tendency assures chances of a consistent annual dividend increase, which would set aside large short-term fluctuations.
A strong 2013 with benign cat loss and improving insurance pricing has left most of the insurers with surplus capital which is now being used to make increased dividend payments and additional share buybacks. Among other insurers, Montpelier Re Holdings Ltd. (MRH), EMC Insurance Group Inc. (EMCI) and HCI Group, Inc. (HCI) have also increased their dividend in the fourth quarter of 2013.
Chubb currently retains a Zacks Rank #3 (Hold).
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