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UnitedHealth Group Inc. (UNH-N) raised its dividend by 30 percent and set a new share buyback program in another show of confidence by U.S. health insurers.
UnitedHealth, the largest U.S. health insurer by market value, raised its quarterly dividend to 16.25 cents US per share from the 12.5 cents it has paid since the second quarter of 2010, the company said on Wednesday.
UnitedHealth's dividend raise and buyback plans come after the company and its rivals posted far better-than-expected first-quarter results and raised their full-year earnings forecasts. The reports provided more evidence that the industry would be able to sustain profits in the wake of last year's healthcare overhaul.
UnitedHealth's moves suggest "management is quite comfortable with current operations, does not foresee any major jolts from (the healthcare law) implementation, and believes the favorable operating environment will persist for some time," Stifel Nicolaus analyst Thomas Carroll said in a research note.
Last year UnitedHealth substantially increased its dividend, which had been only a nominal payout. This was followed by similar moves to raise or initiate dividends by rivals Aetna Inc., WellPoint Inc. and Humana Inc.
Wednesday's announcement pulls the dividend yield up more in line with the 1.5 percent level initially targeted last year, Susquehanna Financial Group analyst Chris Rigg said in a research note.
UnitedHealth's board also authorized the repurchase of 110 million shares, or about 10 percent of the outstanding stock. The buyback would cost nearly $5.3 billion if the shares were purchased at Tuesday's closing price of $47.96.
The company had about 28 million shares remaining under its prior buyback authorization as of the end of April.
"These actions reflect continued growth in our benefits and services businesses," UnitedHealth Chief Financial Officer David Wichmann said in a statement.