In its concerted effort to enhance shareholders value, ACE Limited (ACE) intends to boost its dividend. The board of directors will propose a 4.25% increase in the quarterly dividend at its Annual General Meeting scheduled on May 16, 2012.
If approved, ACE Limited will pay a quarterly dividend of 49 cents ($1.96 on an annualized basis), up from 47 cents ($1.88 on an annualized basis) previously. The increased dividend will be paid second quarter onward.
Following the company’s announcement, there was a spurt in the share movement. It is possible that investors had not expected a dividend hike so soon and thus reacted positively to the news. Recently, 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). The share price of ACE Limited inched up 0.8% to close at $73.35 on Thursday.
ACE has had a consistent track record of paying quarterly dividends and the current dividend is not an exception to the case. The company also has a record of increasing its dividend each year. Its dividend yield of 2.58% is higher than that of industry yield of 2.56%. ACE appears to have a strong capital and liquidity position, which helped it increase the quarterly dividend.
ACE Limited suffered huge catastrophe losses of $155 million, which increased more than threefold in the fourth quarter, thereby weighing on the results. However, premiums increased aided by acquisitions, global accident and health insurance business and property and casualty business in Asia and Latin America. Net investment income also experienced an uptick. The bottom line declined year over year, but surpassed the Zacks Consensus Estimate.
ACE Limited 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.
ACE Limited also guided its operating earnings for 2012 to a band of $6.65-$7.05 per share. The Zacks Consensus Estimate for first-quarter 2012 is $1.89 per share. For full years 2012 and 2013, the Zacks Consensus Estimates are, respectively, $7.54 and $7.56 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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