With the objective of further enhancing shareholders value, the Board of Directors of Principal Financial Group Inc. (PFG) approved a new share buyback program. The new program authorizes the company to buy back up to $200 million worth shares.
The new authorization not only establishes Principal’s continued focus on returning more value to shareholders but also emphasizes on the inherent strength of its liquidity. Principal Financial,on the back of its operational strength, continues to generate healthy cash flows, which in turn supports the company’s strategic investments. The company remains on track to utilize $800 to $900 million of excess capital in 2012.
This new approval follows the already $220 million capital utilized in the first quarter. The Board in the first quarter had approved a share repurchase program worth $100 million and a quarterly dividend of 18 cents, besides acquiring a 60% stake in the Brazilian company Claritas.
In a separate development, the Board also announced a quarterly dividend of 18 cents per share. The dividend will be paid to shareholders of record as of June 4, 2012 on June 29. Principal Financial presently provides a dividend yield of 2.99%, above that of the industry yield of 2.06% as well as that of its nearest peer Lincoln National Corp. (LNC) with a yield of $1.48%.
There was a jump in share price following the announcements. It is likely that continuous efforts on the part of the company to boost shareholders’ value reinstate investor confidence and hence helped the share price to move in the north direction. The share price of Principal Financial inched up 0.2% to close at $24.26 as of Tuesday.
Given $1.6 billion in excess capital, we expect more such strategic actions, which in turn will enhance operational performance and shareholder value.
We retain our Neutral long term recommendation on Principal Financial. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the stock over the near term.
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