In order to boost shareholder value and return more capital to its shareholders, American Financial Group Inc. (AFG) increased its annual dividend by 12.8%. The company will now pay an annual dividend of 88 cents per share. This translates into a quarterly cash dividend of 22 cents per share, up from 19 cents per share paid on Jul 25, 2013.
The newly increased dividend will be paid on a quarterly basis from Oct 2013. Based on the closing share price of $52.23 on Aug 22, 2013, the increased dividend implies a dividend yield of 1.7%. The current dividend yield is better than that of another property and casualty insurer, Everest Re Group Ltd. (RE) with a yield of 1.4%.
This increase in dividend represents the eighth consecutive year of dividend hikes by American Financial. Earlier in Jul 2012, the board of American Financial approved of an 11.4% increase in annual dividend to 78 cents from 70 cents.
Additionally, American Financial has been buying back shares to retain investor confidence in the stock. During the first six months of 2013 American Financial repurchased 1.4 million shares for $70 million and is left with 6.1 million shares to be bought under the present authorization. Cash and cash equivalents at the end of second quarter of 2013 stood at $ 1.3 billion.
Recently, on Aug 21, 2013, another insurer, HCC Insurance Holdings Inc. (HCC) increased its dividend by 36.4%. The company will now pay a quarterly dividend of 22.50 cents per share, up from 16.50 cents paid on Jul 15, 2013.
American Financial currently carries a Zacks Rank #3 (Hold). Among other insurers, EMC Insurance Group Inc. (EMCI) carries a favorable Zacks Rank #1 (Strong Buy) and appears impressive.
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