INDIANAPOLIS (Reuters)—WellPoint Inc. said it would pay a dividend to return some of its profits to investors, the third major U.S. health insurer to recently start a substantial shareholder payout.

WellPoint's dividend follows similar moves by UnitedHealth Group Inc. and Aetna Inc., showing the country's largest insurers are more confident about their prospects after the passage of a U.S. health care overhaul last year created a potentially tougher operating environment.

"They obviously feel pretty comfortable about earnings and cash-flow generation post-reform," Sanford Bernstein analyst Ana Gupte said.

Gupte said WellPoint probably faced greater pressure from investors to pay a dividend after Aetna substantially increased its payout earlier this month. Had WellPoint not announced a dividend, she said, the stock would have come under pressure.

WellPoint shares rose 0.2% to $65.39 in morning trading on Wednesday.

The company declared a quarterly dividend of 25 cents per share, starting in the first quarter.

On an annual basis, the dividend equates to a yield of about 1.5% based on WellPoint's stock price at Tuesday's close on the New York Stock Exchange. That would trail Aetna's yield of 1.6% but exceed UnitedHealth's 1.2%.

Health insurers' shares have performed better than the broader stock market this year after the companies showed investors they can still turn a substantial profit after accounting for the costs of the new health care law. Investors also expect a friendlier business environment in Congress after the Republican Party took a majority in the House of Representatives.

WellPoint, the largest health insurer by enrollment, backed its 2011 profit forecast of at least $6.30 per share and said its board had authorized a stock buyback of $1.6 billion this year.

The announcements came ahead of WellPoint's investor day later on Wednesday in its hometown of Indianapolis, where the company will review its operations and outlook.

Many on Wall Street had expected WellPoint to announce a dividend. Chief Financial Officer Wayne DeVeydt told Reuters earlier this month that the company had the financial capacity to initiate a dividend and would lay out its capital allocation plans at the investor conference.

Even with the dividend and share buyback, WellPoint will still have about $1.3 billion of deployable cash, said Jefferies & Co. analyst David Windley, which "gives the company ample flexibility to pursue a variety of strategic options."