In its concerted effort to share more profits with investors, the board of directors of RenaissanceRe Holdings Ltd. (RNR) authorized a 3.8% increase in its quarterly dividend.
The company will now pay a dividend of 27 cents per share, up from 26 cents paid on December, 2011. The shareholders of record March 15, 2012 will receive the increased dividend on March 30, 2012.
The recent dividend hike marks the company’s seventeenth consecutive annual increase.
Also, the company’s board authorized an increase in its share buyback program, thereby bringing the total authorization to $500 million. During 2011, the company spent $191.6 million to buy back 2.9 million shares.
The dividend hike and share buybacks will primarily be supported by the company’s strong balance sheet and its ability to generate healthy cash flow.
Despite these announcements there was no increase in the share price. It is possible that the stock had factored in the expectation of the dividend increase. Over a decade, the board, has been increasing dividend by only one cent. The share price of RenaissanceRe declined 1.3% to close at $72.54 as on Wednesday.
Also, there was no earnings momentum over the last 7 days. However, the news might encourage analysts to pull up their estimates in the coming days.
The Zacks Consensus Estimate for first-quarter 2012 is currently $2.24 per share. For full years 2012 and 2013, the Zacks Consensus Estimates are, respectively, $8.30 and $9.35 per share.
We retain our long-term Neutral recommendation on RenaissanceRe Holdings given an improving operating leverage due to strategic divestitures and stable ratings.
However, the company historically faces significant challenges due to weather-related events and high competition in the catastrophe insurance and reinsurance segments.
The quantitative Zacks #3 Rank (short term Hold rating) on the stock indicates no clear directional pressure on the shares over the near term.
Based in Hamilton, Bermuda, RenaissanceRe Holdings Ltd. primarily provides property-catastrophe reinsurance to insurers and reinsurers globally on the basis of excess of loss; coverage of losses over a specified limit is termed as excess of loss. The company competes with XL Group plc (XL), Ace Limited (ACE) and PartnerRe Ltd. (PRE).
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