Unitedhealth's Dividend Gets a Big Boost

May.26.10 | About: UnitedHealth Group (UNH)

Hooray for Unitedhealth Group (NYSE:UNH)!

The company is jumping on my lonely call for much-increased dividends. UNH said it’s going to start paying a quarterly dividend of 12.5 cents per share instead of the measly three cents a share it has paid annually.

My only question is why they didn’t they do this years ago? For the past few years, Unitedhealth has made about $3 per share, yet they only paid out about 1% of that to shareholders. What did they do with their money? You guessed it—large share buybacks. And what did shareholders get for all those buybacks? Not much at all. For over four years, the stock has been a dud.

The AP writes: “UnitedHealth is the largest publicly traded health insurer based on revenue. Stifel Nicolaus analyst Tom Carroll says it is extremely unusual for a health insurer to offer more than a token dividend.”

I don’t think UNH will be the last. The projected dividend yield works out 1.7%.