UnitedHealth (UNH) Announces 20% Dividend Hike, Stock Gains

UnitedHealth Group Inc. (NYSE:UNH) has once again cheered its investors by instituting a quarterly dividend hike of 20%. The new dividend of 75 cents per share will be paid in the ongoing quarter.

This increases the yield (measured as annual divided by the price per share) to 1.6% from 1.4% based on the closing price on Jun 7. This increased dividend payout is higher than the current yields offered by other players in the same industry – Humana Inc. (NYSE:HUM) , Cigna Corp. (NYSE:CI) , Aetna Inc. (NYSE:AET) .

The dividend hike comes on the back of UnitedHealth’s strong balance sheet and its ability to generate significant cash flows. Following the news, the stock gained 1.32% in yesterday’s trading session. The stock also hit a new 52-week high of $183.47.Over the past one year the stock has gained 30.3% outperforming the Zacks categorized Medical – Health Maintenance Organization industry which gained 29.3%.

UnitedHealth has regularly been paying dividends for the past several years. This dividend hike once again affirms the U.S. health insurer’s commitment to return more value to its shareholders.

The insurer’s five-year average dividend yield of 1.48% is higher than the industry average yield of 1.2%. Also, the five-year dividend growth rate of 19.7% for the industry is lower than the insurer’s 31% over the same period.
Around same time last year, the health insurer announced a hike of 25% in its quarterly dividend to 62.5 cents per share.

The recent dividend action further cements investors’ confidence in the health insurer. The company was successful in keeping aside investor worries about losses accruing in its individual insurance business on public exchanges by exiting a number of unprofitable exchanges. This has helped the company to axe its losses related to this business that would have pulled down overall earnings. Moreover, the company raised its earnings estimates for 2017 on the back of growth in its health services and health benefits’ segments.

UnitedHealth, the leader in the health insurance industry, is also sought after in the investing community since it offers the best of both worlds– dividend income plus earnings growth.

UnitedHealth carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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