Wednesday, April 27, 2011

Dividend Watch: Making More Income Off Your Health Insurer (HUM, UNH, AET, WLP, CI)

Humana Inc. (NYSE: HUM) just became the newest dividend player when it comes to health insurers.  Maybe you aren’t happy about the cost of healthcare, but at least you can now collect higher income off the profits in this controversial investment sector. Humana raised its earnings guidance and forecasted first quarter earnings at $1.86 per share.  Thomson Reuters has estimates of $1.24 EPS.  For 2011, Humana also raised its guidance to $6.70 to $6.90 EPS against a Thomson Reuters estimate of $6.31.  The big move for investors is the new dividend announcement and the buyback announcement that came with the results.
The new dividend rate will be $0.25 per quarter per share of common stock.  What makes this dividend so interesting is that the dividend yield is north of 1.3%, even after today’s share price rise of more than 5%. Unitedhealth Group, Inc. (NYSE: UNH) currently yields about 1%.  Elsewhere in the sector, WellPoint Inc. (NYSE: WLP) yields about 1.4% and AETNA Inc. (NYSE: AET) yields about 1.5%.  This probably puts the heat on CIGNA Corporation (NYSE: CI) to start a better payout as well as its current yield is only about 0.1%.
Humana’s dividend is payable on July 28, 2011 to stockholders of record on June 30, 2011.  The board also replaced its prior share buyback plan of up to $250 million with a new authorization plan of up to $1 billion by June 30, 2013. The company had about $100 million still outstanding and not executed in its prior plan.  Humana’s market cap is roughly $13 billion after today’s move.
Humana is also realigning its segments into Retail, Employer Group, and Health and Well-Being Services; and it also said it would start to break out its “other” operation income as well.  Humana hit a new 52-week high this morning on the news and shares are currently up 5.3% at $76.58 so far this morning against a new 52-week range of $43.17 to $77.80.
  • Unitedhealth Group, Inc. (NYSE: UNH) is up less than 1% at $48.13 and its 52-week trading range is $27.13 to $48.90.
  • WellPoint Inc. (NYSE: WLP) hit a new 52-week high earlier this morning and the stock is currently up 0.7% at $72.74 and its 52-week trading range is $46.52 to $73.35.
  • AETNA Inc. (NYSE: AET) hit a new 52-week high and the stock is up 1.4% at $39.36 against a 52-week range of $25.00 to $39.71.
  • CIGNA Corporation (NYSE: CI) is up 0.8% at $45.68 and it is almost at a new 52-week high as the range of the last year is $29.12 to $45.98.
What is amazing is that Humana has not paid out a dividend since the early 1990′s.  The goal of the latest healthcare reform, if you call it reform, was to basically turn these insurers into the equivalent of regulated utilities.  The payouts are rising, and the big giant insurance mergers seem to have played out to where there are literally a few key players in each local market now.  If these are on the way to becoming regulated utilities, than investors are likely to demand even higher payouts ahead.

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