XL Group Hikes Div, OKs Buyback


In a concerted effort to share more profits with its shareholders, XL Group plc (XL) hiked its quarterly dividend and approved a new share repurchase program.

The board of directors recently approved a 14.3% hike in its quarterly dividend. The company will now pay a dividend of 16 cents per share, up from 14 cents paid in Dec 31 2013. The increased dividend will be paid on Mar 31, 2014 to the shareholders of record on Mar 14.

Over the past, XL Group has paid regular quarterly dividends and has consistently increased the same each year. Based on Friday’s closing price, XL Group’s dividend yield is 2.2%. The previous dividend hike had been effectuated in Feb 2013, wherein the board had approved a 27.3% increase.

Besides the dividend raise, the board also approved a buyback program, authorizing XL Group to repurchase shares worth $1 billion. The current program includes about $200 million worth of shares remaining under the previous authorization. The company had spent $150 million to buy back 4.9 million shares in 2013, bringing the 2013 tally to 22.5 million shares repurchased for $673 million.  

The dividend hike and new authorization by XL Group is duly supported by the company’s sturdy financial position with cash and cash equivalent of $1.8 billion at 2013-end. A solid operational performance continues to cushion the company’s sturdy financial position.

XL Group has been on an uptrend since it reported solid fourth-quarter earnings on Feb 5. Shares have gained almost 5.3% since then. With the company’s efforts to boost shareholder value, we expect investor confidence to grow further.

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. XL Group presently carries a Zacks Rank #3 (Hold).

Several insurers are treading the same path as XL Group by announcing dividend hikes and/or share repurchase programs. These strategies help retain investor confidence as well as attract new investors. Recently, Old Republic International Corporation (ORI) increased its quarterly dividend by 1.4% to 20 cents per share.  FBL Financial Group, Inc. (FFG) hiked its dividend by a substantial 133% to 35 cents per share while also approving a $50 million share buyback program. AmTrust Financial Services, Inc. (AFSI) raised its dividend by a significant 43% and will consequently pay a quarterly dividend of 20 cents per share.

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