The board of directors of W. R. Berkley Corp. (WRB) has approved an 11% dividend hike representing new annualized rate of 40 cents per share. The first increased dividend, at a quarterly rate of 10 cents, will be paid on Jul 2, 2013 to stockholders of record as of Jun 11, 2013.
This property and casualty insurer has maintained its track record of increasing dividend over the years. The recent dividend hike represents the eighth consecutive increase from 12 cents paid in 2005.
The dividend hike is primarily supported by W.R. Berkley’s strong balance sheet, low debt ratio and its ability to generate healthy cash flow.
During the same time last year, the company had approved a 12.5% hike in its annual dividend.
Nevertheless, W.R. Berkley is one such company in the U.S. property and casualty industry, with a low dividend yield. Following the increased dividend, the stock will provide a dividend yield of 0.80%, which is much lower when compared with its peers.
W.R. Berkley has started a number of new specialty units since early 2006 in order to position itself for the turn of the insurance cycle. It was on account of these units along with moderate premium increases that Berkley witnessed a growth in net premium written in recent years.
W.R. Berkley is also witnessing a continuous improvement in the insurance market. We are fairly positive towards W.R. Berkley’s stock at this moment. Shareholder returns will continue to be positive due to dividend payouts, share repurchases and business growth. By virtue of its high return on equity, few intangibles, low leverage, sound underwriting and limited exposure to volatility, the stock is uniquely poised to benefit from a turn in the cycle.
We believe these positive fundamentals will position the company to continue to pay dividend in future.
Among other property and casualty insurers, recently the shareholders of ACE Limited (ACE), at the extraordinary general meeting held on May 16, 2013, approved the board’s proposal to hike the quarterly dividend by 4% to 51 cents.
Also, tthe board of directors of Assurant Inc. (AIZ) authorized an increase of 19% in its dividend. The company will now pay a quarterly dividend of 25 cents per share.
W.R. Berkley currently retains a Zacks Rank #3 (hold). Montpelier Re Holdings Ltd. (MRH), carrying Zacks Rank #1 (Strong Buy) is worth considering.
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