The shareholders of ACE Limited (ACE), at the extraordinary general meeting held on May 16, 2012, approved the Board’s proposal to hike quarterly dividend to 49 cents. The increased dividend represents a increase of 4.25% from 47 cents per share paid earlier.
The first increased dividend will be paid on August 2, 2012 to the shareholders of record on July 31, 2012.
On an annualized basis, ACE Limited will now pay a dividend of $1.96 per share, up from $1.88 per share. Previously, in January 2012, the Board announced a 34% increase in the quarterly dividend to 47 cents ($1.88 on an annualized basis), up from 35 cents ($1.40 on an annualized basis).
ACE has had a consistent track record of paying quarterly dividends and the current dividend is not an exception either. Also, the company has a record of increasing its dividend every year. Its dividend yield is 2.68%, which is above the industry yield of 2.08%.
ACE appears to have a strong capital and liquidity position, helping it increase the quarterly dividend. The cash balance of ACE Limited at the end of first quarter totaled $715 million, up 16.4% from 2011 year-end level.
ACE Limited guided operating earnings to a band of $7.03-$7.43 per share, up from $6.65-$7.05 per share guided earlier. The Zacks Consensus Estimate for 2012 is $7.70, above the company guidance.
Over the last 7 days, there has been no earnings momentum. We expect the dividend hike will encourage analysts to pull the estimates upward.
ACE Limited posted a strong first quarter benefiting from lower catastrophe activities and higher premiums. The company is well poised on the strength of its international presence, diversified product offering, risk management, conservative underwriting practice and strong reserves. ACE Limited remains focused to enhance its earnings, return on equity and book value per share.
We maintain our long-term Neutral recommendation on ACE Limited. The quantitative Zacks #3 Rank (short term Hold rating) for the company indicates no clear directional pressure on the stock over the near term.
Headquartered in Zurich, Switzerland, ACE Limited, through its subsidiaries, provides a range of insurance and reinsurance products to commercial and individual customers worldwide. The company competes with American International Group Inc. (AIG) and The Travelers Companies Inc. (TRV).
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