UnitedHealth Group will raise its quarterly dividend by another 32 per cent as the price of its stock hits all-time highs.
The payout is being made in the face of funding cuts to a key portion of the health insurer’s business starting next year.
The Minnetonka, Minn., company’s payout of 28 cents per share represents an increase of nearly 7 cents. The largest U.S. health insurer said Wednesday that the dividend will be paid on June 26 to all shareholders of record as of the close of business June 17.
The company said the dividend reflects its growth and consistent financial performance.
Health insurance is UnitedHealth’s largest business, but it also operates segments that sell information technology services and pharmacy benefits management. The company is also expanding internationally, and spent about $4.9 billion to buy Amil Participacoes SA, a Brazilian health benefits and care provider.
UnitedHealth also is the largest provider of Medicare Advantage plans, which are privately run versions of the government’s Medicare program for the elderly and disabled people.
The company’s stock slipped in April after it warned that funding cuts for Medicare Advantage plans had forced it to rethink its earnings growth expectations for next year. The company said widespread government spending cuts that started earlier this year, and have already hit Medicare, will make it difficult to reach the top end of its per-share earnings forecast for 2013, which ranges from $5.25 to $5.50 per share.
Still, investors have clamoured for company shares due in part to its record of trumping Wall Street’s quarterly expectations, its business diversity and a steady cash flow from its growing dividend.
UnitedHealth Group Inc. initiated quarterly payments in 2010 at 12.5 cents per share, becoming the first major health insurer to give shareholders more than a token dividend. A year ago, it raised that dividend from 16.25 cents to 21.25 cents per share.
The new dividend bumps the yield up to 1.8 per cent from about 1.5 per cent, based on the stock’s Tuesday closing price. The dividend yield is calculated by dividing the annual dividend by the company’s stock price.
UnitedHealth also said Wednesday that its board renewed a share repurchase program, authorizing the repurchase of 110 million shares over time, which would add to the value of company shares by taking more of them out of play.
UnitedHealth had about 1 billion shares outstanding as of May 31.
Company shares hit an all-time of $64.90 on May 30, according to FactSet, and the stock has climbed 15 per cent so far this year.
It has retreated since reaching that all-time high, but the shares climbed 35 cents to $62.71 Wednesday morning while broader trading indexes fell slightly.