On Jun 25, 2015, shares of United Fire Group, Inc. UFCS scaled a new 52-week high of $32.99 on the back of strong capital deployments.
United Fire Group’s one-year return of 10.84% was higher than that of other industry players like American Financial Group Inc. AFG, Cincinnati Financial Corp. CINF and Loews Corporation L that recorded returns of 10.18%, 3.43% and -11.48%, respectively.
United Fire Group had approved a 10% dividend hike last month. This translated into a quarterly dividend of 22 cents per share, up from 20 cents paid on Mar 16, 2015. The raised dividend was paid on Jun 15, 2015 to shareholders on record as of Jun 1, 2015. Based on the closing share price of $32.89 as of Jun 24, 2015, the increased dividend implies a yield of 2.70%. This is not only above the sector average of 2.11% but also that of American Financial Group and Cincinnati Financial with yields of 1.51% and 0.64%, respectively.
The insurer has been paying quarterly dividends since 1968 as well as increasing these consistently. Notably, the company’s quarterly dividends increased at a five-year CAGR of 8% (2010-2015).
The ample liquidity enables the company to pay consistent dividends and engage in share buy backs. The latest dividend hike boosted investor confidence and helped in stock price appreciation.
Earlier that month, the company reported first quarter 2015 earnings that surpassed the Zacks Consensus Estimate and improved year over year on high premiums.
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