Marsh & McLennan Boosts Investor Yield - Analyst Blog

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Riding on a solid full-year 2013 and improved first-quarter 2014 results, insurance brokerage giant - Marsh & McLennan Cos. Ltd. ( MMC ) announced incremental deployment of excess capital, thereby boosting shareholder returns.

Adding to shareholder value and confidence, the board of Marsh & McLennan sanctioned a new share repurchase program worth $2.0 billion without any expiry period. Including $463 million of stock at the end of Mar 2013, the company now shares over $2.46 billion available for repurchases.

Previously, Marsh & McLennan had authorized a share buyback worth $1.0 billion in May 2013, out of which, $100 million of shares were repurchased in first-quarter 2014.


Hike in Dividend Payout

Furtherinflating shareholder return, Marsh & McLennan hiked its quarterly dividend by 12% to 28 cents per share from the prior 25 cents, now shelling out $1.12 per share annually. The raised quarterly dividend will be paid on Aug 15, 2014 to shareholders of record as on Jul 11.

So far, Marsh & McLennan's dividend payouts have grown at a CAGR of 6.7% for 2007−2014. Additionally, the company paid dividends worth $137 million during first-quarter 2014, higher than $127 million paid in the year-ago quarter.

Moreover, the hike comes within a year of the last increase of 9% in Aug 2013, before whichMarsh & McLennan had raised its dividend by 5% in May 2012.

At Thursday's closing price of $48.82, the company's dividend yield stands at 2.29%, up from the previous 2.0%. The new dividend yield is also higher than that of Marsh & McLennan's peer, Aon Plc 's ( AON ) 1.21%, based on the latter's closing price on Thursday. Last month, Aon had also increased its dividend by 43% to 25 cents per share.

Rationale

With cash of $1.38 billion and higher retained earnings at the end of Mar 2013, Marsh & McLennan remains decently liquid. Moreover, the company's well-executed restructuring initiatives, modest organic growth and low capital requirements support efficient capital deployment that includes acquisitions.

Subsequently, the stock has also been witnessing modest traction as Marsh & McLennan outperformed the one-year S&P 500 index that projected growth of 14.5%, by yielding a return of 23.7%.

Currently, Marsh & McLennan carries a Zacks Rank #3 (Hold). However, Aon and some more better-ranked peers, including Blue Capital Reinsurance Holdings Ltd. ( BCRH ) and Erie Indemnity Co. ( ERIE ), bear a Zacks Rank #2 (Buy).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: AON , BCRH , ERIE , MMC

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