Health insurer UnitedHealth Group Inc. will raise the quarterly dividend it pays shareholders by more than 30 percent due in part to strong growth across its businesses. It also authorized a stock buyback.
The largest U.S. health insurer said Wednesday that its board authorized a quarterly payout of 21.25 cents per share on June 22 to shareholders of record as of June 15. That's up from the previous dividend of 16.25 cents per share.
The new dividend will produce a yield of about 1.5 percent based on Tuesday's stock closing price of $56.04. The dividend yield is calculated by dividing the annual dividend by the company's stock price.
Health insurance is the Minnetonka, Minn., company's main business, but its Optum segment also provides services like wellness programs, technology outsourcing and pharmacy benefits management.
UnitedHealth reported net income of $1.39 billion, or $1.31 per share, on $27.28 billion in revenue in the first quarter. The performance trumped analyst expectations, something UnitedHealth routinely does.
The insurer's medical enrollment climbed 3 percent to 35.6 million people, which helped balance price hikes from care providers that drove up UnitedHealth's medical costs.
Companies often look to spend the cash they pile up from strong performances on shareholder dividends or stock buybacks.
UnitedHealth said Wednesday its board authorized the repurchase of 110 million shares. That replaces an authorization from last year to buy back 110 million shares. About 33 million shares remained under that authorization.
The company has about 1 billion common shares outstanding. Buybacks theoretically can help the value of outstanding shares by leaving fewer of them on the market.
UnitedHealth became the first big health insurer to offer shareholders more than a token dividend when it started its quarterly payout in 2010 at 12.5 cents per share. The steady cash flow from dividends can make a company more attractive to investors.
Competitors WellPoint Inc., Aetna Inc. and Humana Inc. have since started their own quarterly dividends. Premium growth, cost cutting and health care utilization that has climbed at slower than expected rates have all helped managed care companies turn in solid performances over the past several quarters.
Shares of UnitedHealth have climbed nearly 11 percent so far this year and rose another 1.5 percent, or 85 cents, to $56.89 per share in premarket trading Wednesday.