RLI Improves Shareholders’ Value, Okays Special Dividend
The board of directors of RLI Corp. RLI recently approved a special cash dividend of $1.75 per share for the fourth quarter of 2017. The company has been paying special dividend since 2011 and the latest approval marks the seventh straight special dividend announcement. The insurer also paid a special dividend of $2.00 only last year.
RLI Corp. anticipates dishing out about $88 million for the special dividend. This is well-supported by its strong capital position. The property and casualty insurer maintains a solid balance sheet with sufficient liquidity and strong cash flows. This in turn enables the company to deploy capital through share repurchases, dividend hikes and special dividends to boost the shareholders’ value. Including the recently declared dividends, the company has returned more than $1.2 billion to shareholders over the last 10 years.
Concurrently, the board of directors announced a regular quarterly cash dividend of 21 cents per share. Both these dividends will be paid on Dec 27 to shareholders of record as of Nov 30, 2017.
Apart from paying special dividends, the property and casualty insurer is known for increasing the amount, evident from the continuous dividend hikes in the past 42 years. The company’s regular quarterly dividend has witnessed a four-year CAGR (2013-2017) of 7%.
RLI Corp. carries a Zacks Rank #4 (Sell). Shares of the company have lost 6% year to date, underperforming the industry’s growth of 11.6%. The stock has seen the Zacks Consensus estimate for current-year earnings being revised 14.3% downward and for 2018 moved 2.3% south over the last 30 days. However, we believe that the company’s initiative to share more profits with shareholders amid recovery from the catastrophe loss caused in the third quarter testifies its inherent strength. This will also likely help the stock turn around and motivate analysts to push their estimates up.
Distributing more profits among shareholders through dividends and share repurchases seem to be a well-accepted strategy of insurers to solidify investors’ confidence in their stock. Recently, the board of directors of Assurant Inc. AIZ approved a 6% increase in its dividend while Sun Life Financial Inc. SLF hiked the same by 5%. Earlier in October, Brown and Brown Inc. BRO hiked its dividend by 11.1%.
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