In its consistent effort to share more profit with the shareholders, the board of directors of RLI Corp. (RLI) has approved a special dividend of $3 per share.
RLI Corp. has been paying special dividends to its shareholders over the past few years. This is in addition to the regular dividend payout made by the company. The special dividend was primarily supported by the company’s sturdy financial position.
RLI Corp. has built a solid capital base through strong investments and underwriting results. The company’s sturdy focus on expanding its business, new products and niche underwritings continues to boost its capital base. The company exited the third quarter with strong cash balance of $87.4 million which surged 97.2% from the 2012-end level. Retained earnings of $849.2 million as of Sep 30, 2013 also increased 9.1% from the 2012-end level.
Based on approximately 21.8 million shares outstanding as of Sep 30, RLI Corp. will have to dish out roughly $65 million for the special dividend payments. Its sufficient liquidity will comfortably cushion the payout.
The company will also pay the regular quarterly dividend of 34 cents per share to the shareholders.
Both the special cash dividend and quarterly cash dividend will be paid on Dec 20 to the stockholders on record as of Nov 29, 2013.
RLI Corp.’s quarterly dividend currently yields at 1.40%. This dividend yield is better than that of other property and casualty insurers United Insurance Holdings Corp. (UIHC) (yield of 1.20%) and Platinum Underwriters Holdings Ltd. (PTP) (yield of 0.51%).
RLI Corp. has been consistent in enhancing its shareholders’ value in the last few years through share repurchase activities and dividend payments. Over a span of 5 years, it has returned more than $600 million to its shareholders, thereby boosting investors’ confidence.
Along with the dividend payments, the board of directors of the company also declared a two-for-one stock split. The stock split will be effective on Jan 15, 2013 for shareholders on record as of Dec 30, 2013.
Post the stock split, the number of shares outstanding will double. Though there will be no change in market capitalization, share price is expected to move down by around the same ratio.
However, a higher share count is expected to be a drag on earnings per share in the upcoming quarters.
RLI corp. presently carries a Zacks Rank #1 (Strong Buy). Another property and casualty insurer, Alleghany Corporation (Y) sporting the same Zacks Rank also appears impressive.