As part of its efforts to enhance shareholders’ value, the board of directors of Assurant Inc. ( AIZ) authorized an 8% increase in its quarterly common stock dividend last Friday. The company will now pay a quarterly dividend of 27 cents per share, up from 25 cents paid in the last quarter. The increased dividend will be paid on Jun 10, 2014 to shareholders of record on May 27, 2014.
The dividend hike is primarily supported by Assurant’s strong balance sheet, a moderate debt ratio of approximately 27% as of Mar 31, 2014 and its ability to generate healthy cash flow.
Assurant has a track record of increasing quarterly dividends. The current authorization marks the eleventh dividend hike since 2004. Assurant’s five-year dividend growth rate stands at 12.20%, much higher than the industry’s dividend growth rate of 0.62%.
News of Assurant’s latest dividend hike made the stock price rise 1.11% and close at $67.64 on Friday. The board had last authorized a 19% increase in dividend.
Assurant commenced paying dividends in 2004 (the year it went public) and paid a total of 21 cents per share in its first year. In 2013, the company paid 96 cents per share in dividends, which represented compounded annual average growth of 18.4%.
Going forward, we believe that Assurant will be able to continue increasing dividend payments aided by its low payout ratio. The company has been very careful about its payout ratio and has gradually increased the same over the years. In 2004, Assurant’s dividend payout ratio was 8.3% and over the years, it has increased to reach 15.1% in 2013.
Assurant follows a disciplined capital management strategy and has always managed to keep up shareholders’ confidence by actively deploying capital though dividend payments and share buybacks.
Last month, Assurant reported first-quarter 2014 operating income of $1.68 per share, comfortably beating the Zacks Consensus Estimate of $1.56 per share. Earnings were also up 24% on a year-over-year basis. Strong performance at Assurant Solutions and Assurant Employee Benefits, along with a lower share count owing to share repurchases, boosted the quarter’s results.
Following strong results, Assurant witnessed an increase in earnings estimates. For 2014, earnings estimates went up 2.3% to $6.29 per share as 5 of the 7 analysts covering the stock raised their estimates.