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American Financial to Share More Profit, Ups Dividend by 14%
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American Financial Group Inc. (AFG - Free Report) has announced an annual dividend hike of 14% in its intention to share more profits with shareholders. The board of directors approved the new dividend of $1.60 per share (or quarterly dividend of 40 cents), up from the earlier payout of $1.40 (or 35 cents paid quarterly).
Based on the closing price of $113.48 as of Aug 23, the increased dividend translates into an yield of 1.41%, better than the industry average of 0.5%.
The Zacks Rank #2 (Buy) property and casualty insurer has an impressive track of raising its annual dividend, the recent one marking the 13th straight hike. The company’s dividend record witnessed a five-year CAGR of 12.5%.
The latest dividend hike comes on the back of American Financial’s operational excellence that helps it generate significant cash flows. With about 90.7 million shares outstanding at the end of second-quarter 2018, the company needs to dish out $36.3 million quarterly or $145.1 million annually.
The recent dividend growth instills investors’ confidence in the stock as returning excess capital to shareholders through dividends is a key component of the company’s capital management strategy. The company’s return on equity was 17.1%, having expanded 480 basis points year over year. The figure was also better than the industry average of 5.9%, indicating the company’s efficiency in utilizing its shareholders’ money.
Time and again, companies have resorted to hiking dividends to restore shareholders’ faith. Recently, First American Financial Corporation (FAF - Free Report) rewarded its investors with a 10.5% hike in its quarterly dividend.
Shares of American Financial have slightly underperformed the industry in a year’s time. While the stock has gained 11.4%, the industry has rallied 12.9%. Nonetheless, the insurer’s niche position in the P&C space as well as the annuity markets, its improved pricing, a strong balance sheet and disciplined capital management are expected to drive its stock in the near future.
Other Stocks to Consider
Investors interested in insurance industry can also look at a few other top-ranked stocks like Alleghany Corporation and The Progressive Corporation (PGR - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Alleghany provides property and casualty reinsurance and insurance products in the United States and internationally. The company delivered an average four-quarter positive surprise of 17.61%.
Progressive Corporation provides personal and commercial auto insurance, residential property insurance and other specialty property-casualty insurance and related services, primarily in the United States. The company pulled off an average four-quarter beat of 9.19%.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
American Financial to Share More Profit, Ups Dividend by 14%
American Financial Group Inc. (AFG - Free Report) has announced an annual dividend hike of 14% in its intention to share more profits with shareholders. The board of directors approved the new dividend of $1.60 per share (or quarterly dividend of 40 cents), up from the earlier payout of $1.40 (or 35 cents paid quarterly).
Based on the closing price of $113.48 as of Aug 23, the increased dividend translates into an yield of 1.41%, better than the industry average of 0.5%.
The Zacks Rank #2 (Buy) property and casualty insurer has an impressive track of raising its annual dividend, the recent one marking the 13th straight hike. The company’s dividend record witnessed a five-year CAGR of 12.5%.
The latest dividend hike comes on the back of American Financial’s operational excellence that helps it generate significant cash flows. With about 90.7 million shares outstanding at the end of second-quarter 2018, the company needs to dish out $36.3 million quarterly or $145.1 million annually.
The recent dividend growth instills investors’ confidence in the stock as returning excess capital to shareholders through dividends is a key component of the company’s capital management strategy. The company’s return on equity was 17.1%, having expanded 480 basis points year over year. The figure was also better than the industry average of 5.9%, indicating the company’s efficiency in utilizing its shareholders’ money.
Time and again, companies have resorted to hiking dividends to restore shareholders’ faith. Recently, First American Financial Corporation (FAF - Free Report) rewarded its investors with a 10.5% hike in its quarterly dividend.
Shares of American Financial have slightly underperformed the industry in a year’s time. While the stock has gained 11.4%, the industry has rallied 12.9%. Nonetheless, the insurer’s niche position in the P&C space as well as the annuity markets, its improved pricing, a strong balance sheet and disciplined capital management are expected to drive its stock in the near future.
Other Stocks to Consider
Investors interested in insurance industry can also look at a few other top-ranked stocks like Alleghany Corporation and The Progressive Corporation (PGR - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Alleghany provides property and casualty reinsurance and insurance products in the United States and internationally. The company delivered an average four-quarter positive surprise of 17.61%.
Progressive Corporation provides personal and commercial auto insurance, residential property insurance and other specialty property-casualty insurance and related services, primarily in the United States. The company pulled off an average four-quarter beat of 9.19%.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>