The board of
) has kept its promise of increasing the quarterly dividend per
share by approximately 49% hike to 27.5 cents from the prior 18.5
cents. The announcement led to a 5.5% escalation in the stock
price, which closed at $37.74 on Tuesday.
This marks the first dividend increment since 2007, bringing
the total annual dividend to $1.10 per share. Accordingly, the
hiked dividend will be paid on Jun 13, 2013 to the shareholders
of record as on May 9, 2013. From now, the company will shift to
a quarterly dividend payment structure against the previous
practice of annual dividend payouts.
Thus far, MetLife has not been able to return wealth to
shareholders in its full capacity, despite being adequately
liquid. The latest escalation in dividend has become possible due
to the attainment of the long-desired regulatory approval by
MetLife to deregister as a bank holding company from the Federal
Reserve and FDIC in Feb 2013.This further helped the company pass
the financial stress test in the U.S. in Mar 2013.
MetLife holds one of the sturdiest capital positions in the
industry, which is cushioned by a diversified portfolio mix and a
leading brand, as reflected by its strong book value growth,
healthy ratings and sturdy operating cash flow that soared to
$17.2 billion in 2012 from $10.3 billion in 2011. Moreover, the
company maintains a diminishing risk-profile with a financial
leverage that improved to below 28% in Dec 2012, from 36% in Jun
Though MetLife has closed its banking operations completely,
the ongoing regulatory challenges and the risk of being
acknowledged as a systemically important financial institution
could again put MetLife under the Federal Reserve's supervision
and pose further hindrances in the target to repurchase
shares worth about $8 billion by 2016.
Moreover, the extended low interest rate environment, currency
fluctuations and inflationary pressure are likely to affect
financials in the upcoming quarters. Alongside, intense
competition from arch-rivals
Prudential Financial Inc.
American International Group Inc.
) add to MetLife's woes. AIG also expects to initiate dividends
in the near future.
Overall, a consistent focus on international growth, improved
pricing and the complete exit from the banking business should
enhance operating leverage.The exit from banking status will also
help the company to focus on strategically strengthening its
product-mix, particularly in the emerging nations. This is
required in order to generate more predictable operating earnings
and cash flow. This in turn would help improve MetLife's risk
profile and enhance free cash flow, which could then be used to
enhance shareholder return.
Apart from MetLife, Prudential and
) carry a Zacks Rank #2 (Buy).
AEGON N V (AEG): Free Stock Analysis Report
AMER INTL GRP (AIG): Free Stock Analysis
METLIFE INC (MET): Free Stock Analysis Report
PRUDENTIAL FINL (PRU): Free Stock Analysis
To read this article on Zacks.com click here.