In concerted efforts to enhance shareholder value, the board of directors of American Financial Group, Inc. AFG approved an 11.1% hike in its annual dividend. With this, the payout now stands at $2.00 per share compared with the earlier payout of $1.80 per share.
Prior to this, the company had raised quarterly dividend by 12.5% to $1.80 per share last August, which marked the 14th straight year of dividend hike.
Historically, it boasts a consistent increase in dividends with the metric witnessing a five-year CAGR (2015-2020) of 12.5%. Based on the stock’s Aug 18 closing price of $65.98, the new dividend will yield 2.7%, better than the industry average of 0.5%. This makes American Financial an attractive pick for yield-seeking investors.
American Financial has been consistently raising its dividend payout. The company even pays out special dividend each year. In November 2019, it paid out a special dividend of $1.80 per share.
American Financial has traditionally maintained moderate financial leverage of around low 20%, with good cash flow and interest coverage ratio. The dividend hike reflects the insurer’s strong financial condition, liquidity, and prospects for long-term growth. The company exited the second quarter of 2020 with a sturdy cash balance of $2.7 billion, which increased 16.6% from 2019-end level.
The company is well positioned with excess capital balance of $850 million at quarter end, which positions it well for such shareholder-friendly moves. The company intends to hold back about $200–$300 million of the excess capital to maintain flexibility for any future opportunity.
Shares of this Zacks Rank #3 (Hold) property and casualty (P&C) insurer have lost 33.4% in a year compared with the industry’s decline of 1.1%. Nevertheless, acquisitions, better pricing and improving industry fundamentals will enable the P&C insurer to achieve operational excellence in the days ahead.
Stocks to Consider
Some better-ranked stocks from the same space are Donegal Group Incorporation DGICA, Fidelity National Financial Inc, FNF and The Allstate Corporation ALL, each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Donegal Group Incorporation provides personal and commercial lines of property and casualty insurance to businesses and individuals in the Mid-Atlantic, Midwestern, New England, and southern states. The company beat estimates in the trailing four quarters by 86.44%, on average.
Fidelity National provides various insurance products in the United States and offers title insurance, escrow, other title related services and home warranty insurance. It surpassed estimates in each of the last four quarters, with the average surprise being 32.13%.
Allstate provides property and casualty, and other insurance products in the United States and Canada. It surpassed estimates in each of the last four quarters, with the average positive surprise being 25.24%.
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The Allstate Corporation (ALL) : Free Stock Analysis Report
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