The health insurance company announced that its board of directors has decided to increase its quarterly dividend to $0.28 from $0.2125 per share per quarter. The new dividend yield will be roughly 1.8% after the hike.
What may be of even more interest is that UnitedHealth also set a new share repurchase program of up to 110 million shares of common stock. This represents more than 10% of the entire outstanding shares. You frequently see 10% share buyback announcements when companies are finding their stock battered or undervalued. This was announced at very close to an all-time high on the stock chart.
Why don’t you take a guess what matters more to share performance. We recently featured a ETF analysis focused on companies that are buying back stock versus those just increasing dividends. The consistency of the results may surprise you.
Today’s news may seem like it would matter more than simply a 0.3% gain to $62.60. UnitedHealth’s 52-week range is $50.32 to $64.90, and its market cap is just under $64 billion. The current valuation is 11.5 times expected 2013 earnings.
Many investors have continued to fear health insurance stocks. The performance has so far won over the doubt. We have seen at least one analyst call so far today. Bank of America’s Merrill Lynch reiterated its Buy rating and $72 price target. The Thomson Reuters consensus target is currently $69.33.
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