The board of directors of American Equity Investment Life Holding Company (AEL) approved a 20% increase in its annual cash dividend. The life insurer will now pay an annual dividend of 18 cents per share, up from 15 cents per share paid on Dec 17, 2012. The newly declared dividend will be paid on Dec 16, 2013 to shareholders of record as on Dec 2, 2013.
Based on yesterday’s closing share price of $23.49, the increased dividend of American Equity implies a yield of 0.77%. However, it still lags the dividend yields of other life insurers, like 1.27% of Lincoln National Corporation (LNC) and 2.61% of Manulife Financial Corporation (MFC). Nonetheless, the 5-year dividend growth rate of American Equity presently stands at 20.1%, which is significantly better than the sector growth rate of 6.4%.
The dividend hike of American Equity was primarily supported by its consolidated capital position and solid bottom-line growth, which resulted from top-line improvement combined with reduced expenses. The company delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of nearly 25%. Based on about 70.5 million shares outstanding, the company will have to dish out roughly $12.7 million as annual dividend.
The recent approval marks the 10th straight year of annual dividend increase as well as the 15th consecutive year of dividend declaration. Prior to this, on Nov 2012, the board had approved a 25% increase, raising the dividend to 15 cents per share from 12 cents.
Among other life insurers, the board of directors of StanCorp Financial Group Inc. (SFG) recently approved 18% increase in its annual cash dividend. The company declared an annual cash dividend of $1.10 per share to its shareholders.
There was no earnings momentum over the last 7 days. With the news of dividend increase, we expect analysts to raise their estimates exerting upward pressure on the Zacks Rank. American Equity presently carries a Zacks Rank #2 (Buy).