MetLife Ups Dividend by 27%, Shares Gain - Analyst Blog


For the second time since 2007, the board of global multi-line insurer MetLife Inc. ( MET ) announced a 27% hike in its regular dividend payout to 35 cents per share from the prior 27.5 cents.

Following the announcement, early on Tuesday, MET's stock price climbed 1.5% and closed at $51.90. The raised annual dividend generates a dividend yield of 2.7%, up from prior payout-yield of 2.1%.

The last dividend increase of 49% had been declared in Apr 2013, while the latest hike brings the total annual dividend to $1.40 per share from $1.10. Accordingly, the hiked dividend will be paid on Jun 13, 2014 to the shareholders of record as on May 9.

Although MetLife has withheld share repurchases, we believe appreciation of shareholder value through dividend payouts also instill confidence in the stock. Additionally, optimistic long-term growth, particular within the company's U.S. and emerging markets, assures buoyancy amid economic volatility and low interest rate environment.

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 over 40% earnings growth in 2011-2013, healthy return on equity (ROE) of 12% at 2013-end, ratings and efficient business restructuring. Moreover, the company maintains steady cash flows and a diminishing risk-profile with a financial leverage that improved to below 28% in 2012 and 2013.

However, the ongoing regulatory challenges and the risk of being acknowledged as a systemically important financial institution could put MetLife under the Federal Reserve's supervision and further amplify capital compliances.

Peer Take

Nonetheless, MetLife's confidence lies in its strong fundamentals that has supported a modest dividend increment, similar to industry peers. Earlier this month, Aon Plc ( AON ) hiked its dividend by 43%. Among others, arch-rival - American International Group Inc. ( AIG ) along with RenaissanceRe Holdings Ltd. ( RNR ), AmTrust Financial Services Inc. ( AFSI ) and United Insurance Holdings Corp. ( UIHC ) raised their dividends by 25%, 3.6%, 43% and 33.3%, respectively, in Feb 2014.

While MetLife and United Insurance carry a Zacks Rank #4 (Sell), RenaissanceRe sports a Zacks Rank #1 (Strong Buy). All other aforementioned stocks carry a Zacks Rank #3 (Hold).

AMTRUST FIN SVC (AFSI): Free Stock Analysis Report

AMER INTL GRP (AIG): Free Stock Analysis Report

AON PLC (AON): Free Stock Analysis Report

METLIFE INC (MET): Free Stock Analysis Report

RENAISSANCERE (RNR): Free Stock Analysis Report

UTD INSURANCE (UIHC): Free Stock Analysis Report

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Zacks Investment Research

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: AFSI , AIG , AON , MET , RNR

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