In a bid to share more profit with investors, the board of directors of United Fire Group Inc. approved a 12% hike in its quarterly dividend. The company will now pay a dividend of 28 cents per share compared with 25 cents paid on Mar 15, 2017.
The meatier dividend will be paid on Jun 15, to shareholders on record as of Jun 1, 2017. Based on the closing price of $42.46 on May 17, the increased dividend currently yields 2.64%, which is better than the industry average of 2.46%.
United Fire Group has been paying dividend since Mar 1968. The company has grown its dividend at a five-year CAGR of 13.3%. With about 25.8 million shares outstanding at the end of the first quarter, the company has to dish out about $7.2 million quarterly or $28.9 million annually as dividend. The payout is supported by the company’s strong capital position.
United Fire Group remains committed toward enhancing shareholders’ value via dividend hikes and share buy backs. Apart from dividend payouts, the company regularly engages in share repurchases. It presently has the authorization to repurchase up to 2.8 million of common stock under its share repurchase program up to Aug 2018.
Despite the company’s shareholder-friendly approach, shares of United Fire Group lost about 13.67%, underperforming the Property and Casualty insurance industry’s gain 2.09%. Nonetheless, we expect the company’s capital deployment activities will help the stock turn around going forward.
Dividend hikes and share repurchases seem to be a well-accepted strategy among investors to solidify investor confidence on their stock. Recently, W.R. Berkley Corporation (WRB – Free Report) approved a 7.7% hike in its quarterly dividend as well as a special dividend of 50 cents per share. Principal Financial Group, Inc. (PFG – Free Report) approved the repurchase of shares of up to $250 million. The Progressive Corporation (PGR – Free Report) is also authorized to repurchase 25 million shares. The board of directors of CNO Financial Group (CNO – Free Report) approved a 13% hike in its quarterly dividend and $300 million share buyback program.
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