The Hanover Insurance Rewards Investors With Dividend Hike

The board of directors of The Hanover Insurance Group, Inc. (NYSE:THG) recently approved a 9% hike in its quarterly dividend. The company will now reward its shareholders with a dividend of 50 cents per share as against 46 cents paid on Sep 30, 2016.

Based on the closing share price of $89.23 as of Dec 6, the increased dividend translates to a yield of 2.10%. The dividend will be paid on Dec 30, 2016.

The property and casualty (P&C) insurer remains committed to enhancing shareholder value. In fact, the board of directors is confident about the company’s financial condition and growth trajectory. The dividend hike is indicative of the bullish sentiment and should further strengthen the company’s position, leading to success in both the near and long term.

The Hanover Insurance has been consistently increasing its dividend. The recent hike marks the twelve straight year of dividend increase by the company. The P&C insurer’s regular quarterly dividend has grown at a five-year CAGR (2010–2015) of 11.1%. The increases in dividends are primarily backed by The Hanover Insurance’s sturdy liquidity position.

In addition, the company’s dividend payout ratio is 32.45%, which is much better than the industry dividend payout ratio of 26.76%. Moreover, the P&C insurer’s efficient capital deployment through dividend payouts and share buybacks makes it an attractive pick for yield-seeking investors.

Shares of The Hanover Insurance have surpassed the Zacks categorized P&C industry, since its earnings release. The P&C insurer’s stock gained 18% compared with 10.1% growth witnessed by the industry. Strong growth both in the bottom line and top line, solid premium improvement and decreased losses and expenses, mainly contributed to the outperformance. Also, a robust liquidity position backed by strong cash flow generation has helped the company to invest in strategic initiatives, which in turn, has accelerated its growth. The Hanover Insurance currently carries Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Dividend hikes not only testify to the operational and financial strength of a company, but also make a stock attractive for yield-seeking investors. Last month, the board of directors of Assurant, Inc. (NYSE:AIZ) increased its dividend by 6%, while that of Everest Re Group, Ltd. (NYSE:RE) and American Equity Investment Life Holding Company (NYSE:AEL) approved a 9% hike each in the quarterly dividend.

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