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Thursday, Feb 21, 2013 1:15 PM UTC

WellPoint board OKs 30 pct dividend hike

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Topics: From the Wires,

INDIANAPOLIS (AP) — WellPoint Inc. said it plans to raise the quarterly dividend it pays shareholders by 30 percent, an announcement that comes about week after the health insurer’s stock started slipping after it named a new CEO.

The Indianapolis company said Thursday that it will pay a dividend of 37.5 cents per share in the first quarter, up from its fourth-quarter payout of 28.7 cents per share. The new dividend is payable March 25 to shareholders of record at the close of business on March 8.

In a brief statement, WellPoint did not delve into why its board approved the increase. Companies often look to spend cash they pile up from strong performances on shareholder dividends or stock buybacks.

WellPoint and other big insurers like UnitedHealth Group Inc., Aetna Inc. and Humana Inc. started beefing up their quarterly dividends a few years ago. The steady cash flow from dividends can make a company more attractive to investors.

The sector generally turns in strong performances each quarter, but investors have been wary of the health care overhaul’s impact on insurer profitability. The overhaul promises to bring new business to health insurers by providing coverage to millions of uninsured people starting next year, but it also imposes fees and restrictions on the industry.

WellPoint’s new dividend adds up to $1.50 annually, and that produces a yield of about 2.4 percent, based on the stock’s $62.58 closing price. The dividend yield is calculated by dividing the annual dividend by the company’s stock price.

WellPoint expects to return about $2 billion to shareholders this year, through the dividend and share buybacks. The company had about $1.8 billion remaining from its board-approved share buyback authorization at the end of 2012.

The company’s stock has dropped about 5 percent since it announced on Feb. 12 that veteran hospital executive Joseph Swedish will become its next CEO.

Swedish, 61, will take over March 25, replacing interim CEO John Cannon. He has served as CEO of Trinity Health, a Catholic hospital system, since 2004. His selection surprised some analysts who expected the next leader to have more health insurance experience.

Swedish’s career has focused on hospitals, but he has served as a director for another insurer, Coventry Health Care Inc.

Former CEO Angela Braly resigned last August after investors had become frustrated with the company’s performance.

WellPoint’s shares have climbed about 3 percent so far in 2013. Its shares finished at $62.58 on Wednesday.

More By Tom Murphy.

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