Chubb (CB) Rewards Shareholders with Increased Dividend

Property and casualty insurer, Chubb Corp. CB has announced a 14% hike in its quarterly dividend payment.

Accordingly, Chubb shareholders will pocket a meatier dividend of 57 cents per share on Apr 1, 2015.

The news, however, failed to add sparkle to the share price due to declines in broader markets. The shares managed to gain a mere 0.4% in two trading sessions on Feb 26th and Feb 27th.

This marks the 33rd consecutive dividend hike, indicating 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 its solid liquidity and solvency position (Chubb’s debt to capital ratio has traditionally stayed below 20%).

Prior to this, the company had increased its dividend by 13.6% in the first quarter of 2014.

Based on the last traded share price of $100.45, the company’s dividend yield is 2.3%, much above the industry average of 1.8%.

Aside from continuous dividend increases, this insurer also aggressively buys back shares to boost its bottom line. Last month the company approved a new $1.3 billion share buyback plan.

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 reward its shareholders increasingly every year, irrespective of the difficult market conditions that may hamper its performance. Going forward, we expect the company to stay on this dividend track, aided by improving industry fundamentals which should place the company in a more comfortable financial position.

Moreover, over the past 10 years, the company has kept its dividend payout below 50% (except in 2001 and 2002). This tendency assures consistent annual dividend increase, which would set aside large short-term fluctuations.

A strong 2014 with benign cat loss has left most of the insurers with surplus capital which is now being used to make hike dividend payments and share buybacks. Among other insurers, Old Republic International Corp. ORI increased its quarterly dividend by 1.4% while RenaissanceRe Holdings Ltd. RNR increased its quarterly dividend by approximately 3.5%. Another insurer, Argo Group International Holdings, Ltd. AGII also increased its quarterly cash dividend by 11.1% last month.

Chubb currently carries a Zacks Rank #3 (Hold).