QBE Insurance Group Ltd’s dividend surges above 6.5%

With all the talk at the moment about whether BHP Billiton Limited (ASX: BHP)  and Australia and New Zealand Banking Group (ASX: ANZ) will be forced to cut their dividend, it seems that the rising dividend on offer from QBE Insurance Group Ltd (ASX: QBE) has gone widely unnoticed.

Surging Dividend Yield

Now, eagle-eyed investors will realise that really very little has changed with the QBE story apart from the share price, which has fallen nearly 20% in just three months!

As you’ll know, all else being equal, as a company’s share price decreases its dividend yield increases and the 2016 share market crash has been particularly harsh on QBE.

The company’s share price is back to levels seen at the start of 2015 and throughout the group’s terrible 2014, while the future hasn’t looked so bright for many years.

QBE is due to report its full-year earnings in February and the group’s management has predicted:

  • gross written premium (GWP) between US$15.5bn and US$15.9bn,
  • net earned premium (NEP) between US$12.6bn and US$13.0bn,
  • a combined operating ratio (COR) between 94% and 95%, and
  • an insurance profit margin of between 8.5% and 10%.

What does this mean for investors?

This year analysts are expecting earning per share of 75 cents and a final dividend of 29 cents. In the next 12 months, analysts are expecting a further surge to 83 cents of earnings per share and 53 cents of dividends per share!

This equates to a yield this year of 4.5% fully franked or 6.5% grossed up and 4.9% fully franked and 7% grossed up next year!

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Motley Fool contributor Andrew Mudie owns shares of QBE Insurance Group Ltd. You can find Andrew on Twitter @andrewmudie.

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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