Delphi Raises Dividend - Analyst Blog

Employee benefits provider Delphi Financial Group Inc. (DFG) yesterday announced a single cent increase in quarterly dividend to 11 cents from 10 cents paid in the second quarter of 2010. This hike represents a 10% increase from the previous dividend.

With the increased annual dividend of 44 cents per share, Delphi ’s dividend yield stands at 1.7%. Delphi has also been consistently increasing dividends since 2001, when dividend payment was initiated. Delphi has grown its annual dividend by an average of 16.7% over the past five years. Moreover, the recent hike of 10% is quite respectable for an insurance company after the recent economic beating.

Delphi ’s balance sheet solidity is derived from its long-tail and stable group insurance liability. Also debt-to-capital ratio stands at 19% with no short-term debt and holding company financial resources at a comfortable $96 million.

Moreover, Delphi continues to take measures to enhance its financial flexibility and reduce interest expense by retiring some of its higher interest rate debt. In July, it called off a part of its 8% senior debt along with repurchasing some notes that will result in annual savings of about $2 million in interest expense.

Moreover, in June 2010, Moody’s Investors Service, a subsidiary of Moody’s Corp. (MCO), raised its outlook for Delphi and its operating companies to “stable”, recognizing its improved financial flexibility in regulatory capital. Delphi's regulatory capital levels at its operating subsidiaries remained relatively robust.
 
Delphi had an excellent second quarter and a good first half of 2010, with solid operating earnings and record high levels of shareholders’ equity and book value per share. Book value per share increased 10% since the end of 2009 to $26.74 as of June 30. Operating earnings in the second quarter came at 83 cents per share, a penny ahead of the Zacks Consensus Estimate of 82 cents, benefiting from strong underwriting profits across its insurance businesses.

On the back of an improved performance in the first half of 2010, management expects earnings per share to trend towards the higher range of its guidance of $3.20 – 3.50 per share provided in February 2010.
 
We hold a Neutral recommendation on the shares of Delphi, which carry a Zacks #3 Rank, indicating no clear directional pressure on the shares in the near term.

 
DELPHI FINL GRP (DFG): Free Stock Analysis Report
 
MOODYS CORP (MCO): Free Stock Analysis Report
 
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