The board of directors of AXIS Capital Holdings Limited AXS has approved a new $750 million share repurchase program and a 21% hike in its quarterly dividend. Share price gained about 0.9% in yesterday’s trading session, reflecting investor optimism on prudent capital deployment that will in turn enhance shareholder value.
The new program authorizes the insurer to buy back $750 million worth shares through Dec 2016. Also, the current program replaces the earlier one that has $444 million remaining through the same time frame. The company has always been engaged in buying back shares save for when the board suspended the same for a planned merger with PartnerRe Ltd. PRE. Following the termination of the merger, the Zacks Rank #3 (Hold) property and casualty insurer resumed share buybacks.
With respect to dividend hike, the 21% increase translates to 35 cents per share. The shareholders of record on Dec 31 will receive the meatier dividend on Jan 15. Based on yesterday’s closing share price of $57.46, the increased dividend implies a yield of 2.4%, better than the sector average of 2.2%.
AXIS Capital has an exemplary track of increasing divided each year. The last hike was approved in Dec 2014, where the company had raised its dividend by 7.4%.
The dividend hike and new authorization by AXIS Capital duly reflect its sound financial position which is supported by a strong operational performance. Cash and cash equivalents increased nearly 8% from the 2014-end level to $0.99 billion at third-quarter end. Retained earnings were also solid at $6.1 billion, up 6% from the 2014-end level. The company has returned about $2.3 billion in a period of five years to its shareholders in the form of dividends and buybacks representing 115% of operating income.
Concerted efforts on part of the companies to share more profits not only retain investor confidence, but also help in attracting more investors to the stocks. Besides Axis Capital, some other insurers that have decided to share more profits with their shareholders are The Hanover Insurance Group Inc. THG and Everest Re Group Ltd. RE. While the board of directors of The Hanover Insurance Group approved a 12% hike recently, the board of Everest Re approved a 21% increase in dividend last month.
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