In an attempt to enhance shareholder value, United Fire Group, Inc.’s (UFCS) board of directors has authorized the repurchase of 1 million shares. This is in addition to the 0.87 million shares remaining under its previous authorization. Subsequently, the board of directors also extended the present authorization till Aug 2016.
Notably, the company’s board of directors had announced its first share repurchase program in Aug 2007, with the authorization to buy back up to 0.6 million. Since then, the company has repurchased 28 million shares for $65.6 million, of which 0.2 million shares were bought back for $5.6 million in the last quarter.
The new authorization has been backed by United Fire Group’s solid financial position with cash and cash equivalents of $90.3 million in second quarter 2014. Retained earnings also stood solid at $498.5 million as of Jun 30.
Concurrently, the board of directors of United Fire Group declared a quarterly cash dividend of 20 cents per share. The dividend will be paid on Sep 15 to the shareholders of record on Sep 2. Notably, the company’s dividend yield of 2.67% compared favorably with the industry average of 2.28%.
Following United Fire Group’s earnings miss for second-quarter 2014, the Zacks Consensus Estimate witnessed downward estimate revision. The Zacks Consensus Estimate for 2014 moved south by 14.5% to $1.71. We expect continued share buyback, which will result in lower share count and thereby provide upside to the bottom line.
Stocks to Consider
Currently, United Fire Group carries Zacks Rank #3 (Hold). Better-ranked property and casualty insurers include Endurance Specialty Holdings Ltd. (ENH), Global Indemnity plc (GBLI) and Mercury General Corp. (MCY). All these stocks sport a Zacks Rank #1 (Strong Buy).
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