Assurant (AIZ) Rewards Shareholders With 2.9% Dividend Hike

Assurant, Inc.’s AIZ board of directors recently approved a 2.9% hike in its quarterly dividend in a bid to enhance shareholder value. The insurer will now pay out a quarterly dividend of 70 cents per share compared with 68 cents paid out in August 2022. The meatier dividend will be paid out on Dec 19, 2022, to shareholders of record as of Nov 28.

The recent hike marked the 18th consecutive dividend increase by Assurant since its initial public offering in 2004. Assurant has consistently hiked its dividend, with the metric witnessing an eight-year CAGR (2015-2022) of 12.6%. Based on the stock’s Nov 10 closing price of $126.66, the new dividend will yield 2.1% to Assurant.

The recent dividend hike highlights AIZ’s commitment toward prudent capital management, reflecting its sustained operational performance over a period of time and its sound financial prospects. Traditionally, the company has been utilizing 50% of its free cash flow to repurchase shares. This multiline insurer exited the third quarter with liquidity of $529 million, which was $304 million higher than the insurer’s current targeted minimum level of $225 million.

A solid capital position supports effective capital deployment. Besides the regular dividend hike, Assurant remains committed to returning excess cash to shareholders through share repurchases. In the first nine months 2022, AIZ paid dividends of $460.4 million and repurchased shares for $554.6 million. As of Sep 30, 2022, $287.5 million aggregate cost at purchase remained unused under the repurchase authorization.

This Zacks Rank #4 (Sell) multi-line insurer expects to deploy capital primarily to support business growth by funding investments, mergers and acquisitions and returning capital to shareholders in the form of share repurchases and dividends. AIZ returned $900 million of the Global Preneed net proceeds through share repurchases within one year of closing, completing the return in second-quarter 2022. For 2022, it expects incremental share repurchases to be on the lower end of the targeted $200 to $300 million.

Given the solid capital level of the insurance industry, an improving operating backdrop favoring strong operational performance, insurers like RLI Corp. RLI and American Financial Group AFG have resorted to effective capital deployment to enhance shareholders' value.

In November 2022, RLI declared a special cash dividend of $7 per share, which is expected to total approximately $320 million. RLI has a dividend yield of 0.8%, which betters the industry average of 0.4%. It has been paying dividends for 184 consecutive quarters and increased regular dividends in the last 47 straight years. RLI’s sound capital structure helps it to boost shareholder returns.

In November 2022, American Financial Group also declared a special cash dividend of $2 per share. The aggregate of which will be nearly $170 million. American Financial Group’s 1.7% dividend yield betters the industry average of 0.4%, making the stock an attractive pick for yield-seeking investors. AFG’s robust operating profitability at the property and casualty segment and effective capital management support shareholder returns.

Price Performance

Shares of Assurant have lost 20.9% in a year, compared with the industry’s decline of 5.3%. We expect strong segmental performance along with a robust capital position to help shares bounce back.

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In the past year, shares of RLI Corp and American Financial have gained 17.3% and 2.5%, respectively.

Stock to Consider

A better-ranked stock from the multi-line insurance industry is MGIC Investment Corporation MTG, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The bottom line of MGIC Investment surpassed earnings estimates in each of the last four quarters, the average being 36.32%. In the past year, the insurer has lost 8.7%.

The Zacks Consensus Estimate for MGIC Investment’s 2022 and 2023 earnings has moved 5.9% and 0.4% north, respectively, in the past seven days.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.