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W.R. Berkley Board Okays Dividend Hike and Special Dividend

Zacks Equity Research

In a bid to return more value to shareholders, the board of directors of W.R. Berkley Corporation WRB recently approved a 10% hike in its quarterly dividend. The company will now reward investors with a dividend of 11 cents per share. The amount reflects the 3-for-2 common stock split effective Apr 2, 2019.

The recent increase takes the annual dividend to 44 cents per share. Based on the closing share price of $64.00 as of Jun 6, the increased payout translates to a dividend yield of 0.69%.

This apart, the board of directors also announced a special dividend of 50 cents per share. Shareholders on record as of Jun 18 will receive both increased as well as special dividend on Jul 2, 2019.

Backed by its operating strength, the Zacks Rank #2 (Buy) property and casualty insurer has a solid track record of increasing dividend each year as well as paying special dividends. While the latest dividend hike is the 14th consecutive increase since 2005, the special dividend is the 10th since 2012. Notably, last year, the company paid special dividend thrice reflecting operational excellence.

Also, its return on equity, a profitability measure of how efficiently the company is utilizing its shareholders money, is 10.2%, higher than the industry average of 7.1%. Year to date, the company has returned about $262 million capital to its shareholders.

W.R. Berkley has a solid balance sheet with sufficient liquidity and robust cash flows that supports growth initiatives and effective capital deployment. One of the largest commercial lines writers in the United States, it has been enhancing investors’ value through prudent capital deployment in the form of share buybacks and dividend hikes. Such initiatives reflect the operational and financial strength of the company but also make the stock attractive to yield-seeking investors.

Shares of W.R. Berkley have rallied 29.9% year to date, outperforming the industry’s increase of 4.3%. Steady net premium growth, improving combined ratio owing to additional rate and effective management of volatility and expenses, scope for margin improvement and focus on underwriting profitability as well as on areas of the business that offer better margins should help the stock retain the bull run. The company has also witnessed positive estimate revision in the past 60 days.

Given the sturdy capital position of the insurance industry, there have been a number of dividend hikes and share buyback authorizations. Last month, the board of directors of Unum Group UNM hiked its quarterly dividend by 9.6% and approved a new $750 million share buyback program. The board of directors of CNO Financial Group, Inc. CNO raised dividend by 10% while Chubb Limited CB announced a 3% hike in quarterly dividend.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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