In its consistent effort to share more profit with the shareholders, the board of directors of Allied World Assurance Company Holdings, AG (AWH) intends a dividend hike of 35% to $2.70 per share.
Riding on the strength of its strong financial capacity that in turn, is supported by a solid operational performance, Allied World has increased its dividend at a 5-year CAGR of about 30%.
Based on approximately 35 million shares outstanding as of Dec 31, 2013, Allied World will have to dish out roughly $94.5 million annually as dividend payments. The company will fund the payout from the general legal reserve from capital contributions.
Based on yesterday’s closing price of $100.95, Allied World’s dividend currently yields 2.67%, better than the industry average of 2.15%.
Allied World has been consistently enhancing its shareholders’ value in the last few years through share repurchase activities and dividend payments. As such, it also eyes a new $500 million share buyback program. The buyback program, when approved, will replace the current authorization that has $192 million remaining as on Feb 28, 2014. Over a span of 3 years, it has returned more than $525.3 million to its shareholders, thereby boosting investors’ confidence.
Along with the dividend hike and the share buyback, the board of directors of the company also declared a three-for-one stock split.
Post the stock split, the number of shares outstanding will be almost three times. Though there will be no change in market capitalization, share price is expected to move down by around the same ratio. As a result, the stock will be more affordable for potential investors interested in holding it for some time.
However, a higher share count is expected to be a drag on earnings per share in the upcoming quarters.
All these proposals are subject to shareholders’ approval at Allied World 2014 Annual Shareholder Meeting to be held on May 1, 2014.
Allied World presently carries a Zacks Rank #3 (Hold).
Several insurers are treading the same path as Allied World by announcing dividend hikes and/or share repurchases. These strategies help retain investor confidence as well as attract new investors. Recently XL Group plc (XL) hiked its quarterly dividend by 14.3% and approved a $1 billion buyback program.
AmTrust Financial Services, Inc. (AFSI) increased its dividend by 43% and sanctioned a $150 million buyback program. FBL Financial Group Inc. (FFG) raised dividend by 133% and approved a $50 million share repurchase program.