The Progressive Corporation (NYSE:PGR – News) announced plans to return $3 billion to shareholders through an extraordinary cash dividend of $2.00 per Common Share and a new authorization to repurchase up to 100 million of its Common Shares over the course of the next 24 months. This expands the total authorization to approximately 108.3 million shares.
The extraordinary cash dividend is payable on September 14, 2007, to shareholders of record at the close of business on August 31, 2007.
The company will partially fund the dividend and repurchase with approximately $1 billion of hybrid debt securities.
The company returned approximately $523 million to shareholders through share repurchases in 2007. The company’s previously announced annual variable dividend program will not be modified as a result of the recapitalization plan.
The Progressive Group of Insurance Companies, in business since 1937, is the country’s third largest auto insurance group and largest seller of motorcycle and personal watercraft policies based on premiums written, and is a market leader in commercial auto insurance.
PAYOUT YIELD ANALYSIS
With 724 million shares outstanding, the 100 million share repurchase will return about $3.03 per share over the next 2 years or an annualized rate of $1.51 per share. The company also pays a $0.04 annual dividend.
The special dividend of $2 per share payable in September, combined with the repurchase and regular dividend combines for a Total Payout of $3.55 per share over the next 4 quarters. At a share price of $24, the Total Payout Yield would be 14.8% over the next 4 quarters.
In the second year of the program, the repurchase plus regular dividend will combine for a Total Payout of $1.55 or 6.5% at a share price of $24.
- Payout Yield Staff