In a concerted effort to enhance value for its shareholders, the
Board of Directors of
Principal Financial Group Inc.
), announced a 17% increase in its dividend. Following the
announcement, Principal Financial will now pay a quarterly dividend
of 21 cents per share, up from 18 cents paid on June 29, 2012. The
enhanced dividend will be paid on September 28 to shareholders of
record as of September 6.
The new authorization not only reiterates Principal's continued
focus on returning more value to shareholders but also emphasizes
the inherent strength of its liquidity. Also, increased focus on
fee based business enables the company to return more earnings to
Principal Financial, on the back of its operational strength,
continues to generate healthy cash flows, which in turn supports
the company's strategic investments. Thus, it remains on track to
utilize $800 to $900 million of excess capital in 2012.
Principal Financial's annualized dividend yield of 3.1% is much
higher than the industry average of 1.5% and that of its nearest
Lincoln National Corp.
), with an annualized dividend yield of 1.3%.
Shares of Principal Financial rose on the announcement. It is
likely that continuous efforts on the part of the company to boost
shareholders' value has reinstated investor confidence and hence
helped the share price move higher.
In addition to dividends, the company also actively buys back
shares. In the second quarter, it repurchased 5.4 million shares,
bringing the year-to-date tally to 7.2 million. The Board also
approved buy back of shares worth $200 million.
LINCOLN NATL-IN (LNC): Free Stock Analysis
PRINCIPAL FINL (PFG): Free Stock Analysis
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There was no upward movement in estimates over the last 7 days.
However, we believe the news of sharing more profits with
shareholders might encourage analysts to pull their estimates
upward. The Zacks Consensus Estimate for third-quarter 2012 is 75
cents per share. For full years 2011 and 2012, the Zacks Consensus
Estimates are, respectively, $2.95 and $3.36 per share.
Given $1.5 billion in excess capital, we expect more such strategic
actions, which in turn will enhance operational performance and
We retain our Neutral recommendation on Principal Financial. The
quantitative Zacks #4 Rank (short-term Sell rating) for the company
indicates downward pressure on the stock over the near term.