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Allstate (ALL) Rewards Shareholders With 50% Dividend Hike

In a bid to enhance shareholder value, The Allstate Corporation’s ALL board of directors recently approved a 50% hike in the quarterly dividend. The company will now pay out a dividend of 81 cents per share compared with the prior payout of 54 cents.

The increased dividend, which marked the 10th straight year of dividend hike, will be paid on Apr 1, 2021 to shareholders of record as on Mar 4.

Prior to the recent hike, the company had last raised quarterly dividend by 8% to 54 cents per share in February 2020.

Historically, this property & casualty (P&C) insurer boasts of a continuous rise in dividends with the metric witnessing a 10-year CAGR of 15%. Based on the stock’s Feb 22 closing price of $105.31, its dividend yield of 2.1% compares favorably with the industry’s figure of 0.6%. This makes Allstate an attractive pick for yield-seeking investors.

This month itself, two other P&C insurers, RenaissanceRe Holdings Ltd. RNR and Cincinnati Financial Corporation CINF, have undertaken similar measures. While RenaissanceRe has approved a 2.9% hike in its quarterly dividend, Cincinnati Financial approved a 5% raise.

Time and again, Allstate has resorted to deploying capital in the form of share buybacks and dividend payments driven by its operational and financial strength. Payment of common dividends worth $2.9 billion and buying back 24.9% of common shares outstanding during the past five years is a clear-cut indication of the same.

At a time when most insurance companies have been compelled to temporarily halt share repurchases due to the COVID-19 induced market volatilities, Allstate’s move is surely commendable.

Moreover, this Zacks Rank #3 (Hold) company has bought back 5.5% of common shares outstanding worth $1.7 billion during 2020. In September 2020, the company inked a $750 million accelerated share repurchase (“ASR”) agreement, which concluded on Jan 12 of this year. Consequent to the completion, the company has $1.45 billion remaining under its $3 billion buyback program, which is expected to be concluded by the end of this year.

Furthermore, a growing cash balance empowers the company to mitigate balance sheet risks, pursue several growth-related initiatives and implement accelerated capital deployment strategies. Case in point, Allstate exited fourth-quarter 2020 with a sturdy cash balance of $377 million, which climbed 11.5% from 2019-end level. Based on a strong liquidity standing, the company has invested $5.9 billion in growth initiatives during the past five years via the buyouts of SquareTrade, InfoArmor and National General.

Additionally, return on equity, a profitability measure to identify how tactically the company is utilizing its shareholders’ funds, stands at 18.9% as of Dec 31, 2020, which remains higher than the industry’s average of 5.6%. The company targets its long-term adjusted net income return on equity to lie in the band of 14% to 17%.

Shares of Allstate have gained 10.8% in the past six months in line with the industry. Moreover, we believe the company’s growing premiums and divestitures to streamline operations are likely to drive the stock in the days ahead.

A Stock to Consider

A better-ranked stock in the same space includes Markel Corporation MKL, which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Markel has a trailing four-quarter earnings surprise of 164.00%, on average.

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RenaissanceRe Holdings Ltd. (RNR): Free Stock Analysis Report
 
The Allstate Corporation (ALL): Free Stock Analysis Report
 
Cincinnati Financial Corporation (CINF): Free Stock Analysis Report
 
Markel Corporation (MKL): Free Stock Analysis Report
 
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