In order to increase shareholders’ worth, the board of directors of ProAssurance Corporation PRA has declared a special dividend of $1.00 per share. Additionally, a regular quarterly dividend of 31 cents was declared. Both the dividends will be paid on Jan 8, 2016 to shareholders on record as of Dec 24, 2015.
Earlier also, the company has not refrained from paying special dividends. In fact, the insurer’s special dividend history remains impressive with the same being declared twice in the last three years. The special dividend declared in 2012 was of $2.50 per share, while that in 2014 was of $2.65. Declaring special dividends from time to time alongside regular dividends boost shareholders’ worth, thereby retaining their confidence in the stock. This is also likely to lead to share price appreciation.
The company has been paying dividends on a regular basis. The last quarterly dividend was paid on Oct 7, 2015 to shareholders on record as of Sep 24, 2015. Based on the closing share price of $52.42 as of Dec 2, 2015, the annualized dividend of $1.24 translates to a yield of 2.4%, higher than the industry average of 2.24%. It is also higher that of some other insurers like Infinity Property and Casualty Corp. IPCC, RLI Corp. RLI and United Insurance Holdings Corp. UIHC with yields of 2.01%, 1.25% and 1.07%, respectively. The present dividend translates to an increase at a four-year CAGR of 25.5% over 2011 payout.
The overall capital deployment initiatives undertaken by ProAssurance have been compelling. The company declared $120 million worth of dividends (including regular and special) and engaged $167.5 million toward share repurchases so far in 2015. This takes the tally to $1.4 billion of share buybacks and dividend declared since 2007.
The efficient capital deployments reflect the financial strength and strong operating results of the company. ProAssurance’s ample liquidity for the payment makes us optimistic. We expect that strong free cash flow generation will help the company to engage in more buybacks and dividend payouts so as to enhance its shareholder value.
ProAssurance currently carries a Zacks Rank #3 (Hold).
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