AXIS Capital Holdings Limited (AXS) intends to boost dividend to enhance shareholders’ value. The board of directors recently approved a 8% hike in quarterly dividend. The company will now pay a dividend of 27 cents per share, up from 25 cents paid in Oct 2013.
The increased dividend will be paid on Jan 15, 2014 to the shareholders of record on Dec 31, 2013.
AXIS Capital, over the past, has paid regular quarterly dividends and has increased dividend each year. The current dividend marks the tenth straight year of increase. Based on yesterday’s closing price of $48.46, AXIS Capital’s dividend yield is 2.22%. Its earlier dividend hike had been effectuated in Dec 2012, wherein the board had approved a 4.2% increase.
Besides the dividend hike, the board also approved a buyback program, authorizing AXIS Capital to repurchase shares worth $750 million through Dec 31, 2014. The current program replaces the earlier one that has $308.9 million remaining through Dec 31, 2013. The company had spent $441 million to buy back 10.1 million shares thus far in 2013, bringing the tally to 78 million shares repurchased for $2.6 billion over the last 10 years.
The dividend hike and new authorization by AXIS Capital is duly supported by the company’s sturdy financial position. Cash and cash equivalent increased nearly 38% from 2012-end to $1.05 billion at third-quarter end. Retained earnings also stand solid at $4.9 billion, up 10%. A solid operational performance continues to cushion the company’s sturdy financial position.
AXIS Capital has been on an uptrend since it reported solid third-quarter earnings on Oct 30. Shares have gained almost 3% since then. With the company’s efforts to boost shareholder value, we expect investor confidence to grow further. Additionally, with excess capital of $6.7 billion as on Sep 30, 2013, we expect such initiatives by the company going forward, besides investments in growth projects.
We also expect analysts to revise estimates upward and in turn affect the Zacks Rank positively, following the proposal to increase dividend and the new share buyback approval. AXIS Capital presently carries a Zacks Rank #2 (Buy).
Several insurers are treading the same path as AXIS Capital by announcing dividend hikes or share repurchases. These strategies help retain investor confidence as well as attract new investors. Last month, property and casualty insurer Montpelier Re Holdings Ltd. (MRH) approved a 9% increase in quarterly dividend to 12.50 cents per share and also raised its share buyback authorization by $150 million.
The board of directors of The Hanover Insurance Group Inc. (THG) approved a 12.1% increase in its quarterly dividend to 37 cents. The board of ACE Ltd (ACE) also approved a buyback program, authorizing the company to repurchase $2 billion worth of shares through Dec 31, 2014. ACE also announced its intention to propose a 24% hike in dividend in the extraordinary general meeting scheduled on Jan 10, 2014.