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Chubb (CB) Board Looks to Recommend Dividend Hike of 2.6%

The board of directors of Chubb Limited CB is set to propose a 2.6% increase in annual dividend at the company’s annual general meeting. This hike, if approved, will mark the 28th consecutive dividend increase by the company.

On approval of the same, Chubb will pay out a quarterly dividend of 80 cents ($3.20 on an annualized basis) compared with the current dividend of 78 cents ($3.12 on an annualized basis).

The board of directors of also declared a quarterly dividend of 78 cents per share. The dividend will be paid out on Apr 9 to shareholders of record as of Mar 19.

Prior to the recent hike, the company had raised the quarterly dividend by 4% to 78 cents per share last year in May.

Chubb has a stellar track record of paying quarterly dividends and raising its dividend payout each year. Chubb has more than doubled its quarterly dividend since 2010, reflecting sustained solid operational performance.
Based on the closing price of $164.94 as of Feb 25, the company’s dividend yield is 1.9%, much above the industry average of 0.5%. Notably, the company’s dividend has witnessed a six-year CAGR (2014-2020) of 7.7%.

It returned $1.9 billion to shareholders or 58% of earnings, including $1.4 billion in dividends and $516 million in share repurchases in 2020.

Apart from continuous dividend increases, Chubb aggressively buys back shares to boost its bottom line. In February 2021, its board approved an increase to the November 2020 share repurchase program of $1 billion to a total of $2.5 billion, effective through Dec 31, 2021.

In 2020, it repurchased shares worth $516 million. Subsequently, from Jan 1 through Feb 24, 2021, the property and casualty insurer repurchased shares for a total of $327 million under the share repurchase program authorized in November 2020. As of Feb 24, 2021, $2.17 billion in share repurchase authorization remained, available through Dec 31, 2021.

The company has maintained a strong balance sheet and financial flexibility, including consistent cash flow generation, for the past many years.  The company’s cash flow has been increasing over the years. This has paved the way for prudent capital deployment measures. The company had $1.7 billion in cash and cash equivalents at the end of fourth-quarter 2020, which grew 13.7% from 2019-end.

Recently, three other P&C insurers, RenaissanceRe Holdings Ltd. RNR, Cincinnati Financial Corporation CINF and The Allstate Corporation ALL have undertaken similar measures. While RenaissanceRe has approved a 2.9% hike in its quarterly dividend, Cincinnati Financial approved a 5% raise. The board of directors of Allstate approved a 50% hike in the quarterly dividend.

Shares of this Zacks Rank #3 (Hold) property and casualty insurer have outperformed the industry in the year-to-date period. The stock has gained 7.2% compared with the industry’s growth of 4.6%. The company’s expanded capabilities, strategic growth initiatives and effective capital deployment should help the stock sustain momentum.

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