Donegal Group Inc.
), a leading property and casualty insurer has decided to reward
its shareholders with a new buyback program.
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As per the latest share buyback authorization, Donegal will be
able to purchase up to 0.5 million shares of its Class A common
shares at market price from time to time through open market or
privately negotiated transactions. The new program has no fixed
Donegal's financial strength allows it to continue with its
buyback program and dividend payouts. Cash from operations,
generated by Donegal in the first quarter of 2013 improved
substantially year-over-year. We expect this to consistently
cushion future buybacks. Since Feb 2009, the company repurchased
0.27 million shares through the first quarter of 2013 and is left
with 0.03 million shares to be repurchased under its existing
During the first quarter of 2013, Donegal's operating income
declined year over year. We expect the new buyback program will
help it recover earnings going forward. The Zacks Consensus
Estimate for 2013 is currently pegged at 95 cents per share
representing a year-over-year improvement of 30.14%.
Additionally, the board of directors announced a quarterly cash
dividend of 12.75 cents per Class A common share and 11.50 cents
per Class B common share. The dividend on Class A common stock
represents a 4.1% increase over the company's payout in the
year-ago period. On the other hand, the dividend on Class B
common stock represents a 4.5% increase over the payout in the
prior year period. These dividends equate to a 3.48% and 2.15%
yield respectively based on the share price of $14.66 and $21.37
respectively as of the approval day, Jul 18, 2013. Both the
dividends will be paid on Aug 15, 2013 to shareholders of record
as of Aug 1, 2013.
Donegal is scheduled to release its second quarter 2013 results
on Jul 26, 2013. The Zacks Consensus Estimate for the second
quarter of 2013 is currently pegged at 18 cents representing a
year-over-year improvement of 350%.
Donegal carries a Zacks Rank #3 (Hold). Among other insurers,
AmTrust Financial Services Inc.
Hilltop Holdings Inc.
) carry a favorable Zacks Rank #1 (Strong Buy) and are worth