Shares of Montpelier Re Holdings Ltd. (MRH) edged up 1.2% to $28.40 riding on the strength of the company’s effort to enhance shareholder value via dividend increase and share buyback approval announced on Nov 15.
The board of directors of Montpelier Re increased its dividend by 9%. The company will now pay quarterly dividend of 12.50 cents per share, up from 11.50 cents paid on Oct 15, 2013.
The newly increased dividend will be paid on Jan 14, 2014 to the shareholders of record as of Dec 31, 2013. Based on the closing share price of $28.07 on Nov 15, the increased dividend implies a yield of 1.8%. The current dividend yield of the company is almost in line with the industry average. The recent approval marks the fifth straight year of dividend increase for Montpelier Re. Its dividend has grown at a 5-year CAGR of about 11%.
Last month, the board of directors of property and casualty insurer HCI Group (HCI) approved a dividend increase of 22.2% to 27.50 cents per share. The board of directors of EMC Insurance Group Inc. (EMCI) also recently increased its quarterly dividend by 9.5% to 23 cents per share.
Montpelier Re has remained committed toward enhancing shareholder value. Besides the dividend hike, the board also increased the share buyback authorization by $150 million. As of Nov 15, the company is left with $279 million under its authorization. In the first nine months, Montpelier Re bought back about 5.3 million shares, higher by 8.2% shares bought back in the year-ago period.
Recently, the board of directors of Assurant Inc. (AIZ) approved a share buyback program whereby the company is authorized to repurchase shares worth $600 million.
The dividend hike and new authorization by Montpelier Re is duly supported by the company’s sturdy financial position. While cash and cash equivalent increased nearly 60%, cash from operations also went up 2% year over year. A sustained solid operational performance continues to cushion the company’s sturdy financial position.
There has been no earnings momentum over the last 7 days. With the news of increase in dividend and the new buyback authorization, we expect analysts to raise their estimates exerting upward pressure on the Zacks Rank. Montpelier Re presently carries a Zacks Rank #2 (Buy).
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