On Jul 2, 2015, shares of W.R. Berkley Corporation WRB scaled a new 52-week high of $55.13 on the back of increased dividend and share buyback program.
The year-to-date return from the stock came in at 6.3%, which was significantly ahead of the S&P 500 index return of 0.9%.
On Jun 2, 2015, the property and casualty insurer’s board of directors announced a 9% dividend hike representing a new annualized rate of 48 cents per share. This increased dividend was paid on Jul 1, to stockholders on record as of Jun 15 at a quarterly rate of 12 cents per share.
The recent dividend hike represents the 10th consecutive increase from 12 cents paid in 2005. The increased dividend payout reflects W.R. Berkley’s strong balance sheet, low debt ratio and its ability to generate healthy cash flow. Dividend hikes like this reflect the company’s focus on returning more profit to its shareholders. This initiative not only retains investors’ confidence in the stock but also attracts new investors.
The company’s board also approved an increase in its share repurchase authorization from its previous level of 10 million shares of common stock. The 10 million share repurchase authorization represents approximately 8% of its shares outstanding as of Mar 31, 2015. As of Mar 31, W.R. Berkley returned $105 million to its investors via share buybacks and dividend payment. The company’s continuous efforts to reduce the outstanding share count will bolster its earnings per share, going forward.
Moving ahead, we expect the company to continue the trend of paying healthy dividends on the back of high return on equity, a few intangibles, low leverage and sound underwriting discipline. Shareholder returns will continue to be positive due to dividend payouts, share repurchases and business growth.
Currently, W.R. Berkley carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the same sector are Endurance Specialty Holdings Ltd. ENH, Argo Group International Holdings, Ltd. AGII and Markel Corp. MKL. All of these stocks sport a Zacks Rank #1 (Strong Buy).
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