In its concerted efforts to enhance shareholder value, the board of directors of Willis Towers Watson Public Limited Company WLTW has recently hiked its quarterly dividend by 13% as well as approved a $400-million addition to its share buyback program.
The new dividend payout amounts to 60 cents per share compared with 53 cents paid earlier. The annualized dividend of $2.40 yields 1.5%, based on the closing price of $161.21 as of Feb 26. Shareholders are expected to fill in their pockets with this meatier dividend come Apr 16.
Willis Towers has been increasing its dividend since Willis Group and Towers Watson merged to form Willis Towers Watson in 2016. The company has ever since raised dividend by 25% over a couple of years. This should further help maintain its target dividend payout ratio of the same percentage.
Apart from dividend raises, Willis Towers engages in share buybacks to lower the share count and boost its bottom line. The board members hence authorized an extra $400-million repurchase to its $1.2-billion buyback program of 2016 with $600 million remaining for repurchase. Shares will be bought back through the current and next year.
Willis Towers repurchased shares worth $710 million in 2017 and expects to buy back in the range of $600-$800 million in 2018.
The insurance broker's consistent endeavors to improve shareholders' value make it an attractive stock pick for yield-seeking investors.
A sturdy financial position, backed by continued solid operational performance by core operations, enables the company to generate enough capital. This in turn positions it well to increase its payouts or engage in other shareholder-friendly moves. Willis Towers is also decently liquid. The company estimates a free cash-flow generation between $1.1 billion and $1.3 billion in 2018.
Shares of Willis Towers have rallied 27.3%, outperforming the industry
's 21.6% gain. Strategic attempts to add to shareholders' value will not only make this stock an attractive pick for investors but also drive its shares higher.
Willis Towers carries a Zacks Rank #3 (Hold).
Dividend hikes and share repurchases seem a well-accepted approach among insurers to solidify investor confidence in their stock. For instance, the board of Chubb Limited CB has recently announced a 2.8% hike in quarterly dividend to 73 cents per share. Also, Assured Guaranty Ltd AGO has approved a 12% increase in its quarterly dividend.
Stock to Consider
A better-ranked stock from the insurance broker industry is Erie Indemnity Company ERIE , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .
Erie Indemnity Company operates as a managing attorney in fact for subscribers at the Erie Insurance Exchange in the United States. The company came up with a 5.26% positive earnings surprise last quarter.
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Erie Indemnity Company (ERIE): Free Stock Analysis Report Willis Towers Watson Public Limited Company (WLTW): Free Stock Analysis Report D/B/A Chubb Limited New (CB): Free Stock Analysis Report To read this article on Zacks.com click here.