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RLI Boosts Shareholder Rewards, Hikes Dividend by 4.2%

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The board of directors of RLI Corp.  (RLI - Free Report) recently approved a hike in its quarterly dividend to enhance shareholder value. The company will now pay out a dividend of 25 cents per share compared with 24 cents paid on Jun 19, 2020, which reflects an increase of 4.2%. Shares of RLI lost 1.8% in the last two trading days.

Shareholders of record as of May 28, 2021 will receive the increased dividend on Jun 18, 2021. Based on closing share price of $110.92 on May 10, the raised payout represents a dividend yield of 0.9%, better than the industry average of nearly 0.3%. Prior to this, the company had raised quarterly dividend by 4.3% to 24 cents per share last May.

Notably, RLI has been consistently hiking its dividend with the metric witnessing a seven-year CAGR (2014-2021) of 5.7%. The company has been paying dividends for 178 consecutive quarters and increased regular dividends for 46 straight years, reflecting its commitment toward prudent capital management.

The insurer has also been paying special dividends to its shareholders for the last few years. With special dividends, the company has returned over $1.1 billion in dividends over the last decade. In the last five years, the company paid out total dividend of $495 million.

The board of directors is committed to rewarding shareholders directly through cash dividends and share repurchases. However, it has not repurchased any shares in 2021 so far. At present, it has $87.5 million of remaining capacity from the repurchase program.

The dividend increase is supported by the company’s strong capital structure. Its healthy balance sheet with unparalleled financial flexibility allows investment in business.

In the first quarter of 2021, it produced solid operating results and its financial position remained strong. It generated net operating cash inflows of $60.3 million and expects to have sufficient sources of liquidity to meet anticipated needs over the next 12 to 24 months. The insurer’s revolving credit facility has a borrowing capacity of $60 million, which can be increased to $120 million under certain circumstances. Further, membership in the Federal Home Loan Bank system provides a secured lending facility with an aggregate borrowing capacity of approximately $30 million.

The company drives long-term sustainable growth for shareholders with the help of product portfolio, careful selection of niche markets, distribution partners and customers and the strength of their balance sheet, which in turn enable it to hike regular dividends.

Recently, another insurer, Radian Group Inc. (RDN - Free Report) hiked its dividend by 12%. Shareholders of record on May 24, 2021 will receive this meatier dividend on Jun 4, 2021.

Shares of this Zacks Rank #3 (Hold) P&C insurer have outperformed the industry in the past year. The stock has gained 56.8%, outperforming the industry’s increase of 55.9%. We expect improvement in the top line and a solid capital position to drive shares in the near term.

Stocks That Warrant a Look

Some better-ranked stocks from the same space are Selective Insurance Group, Inc. (SIGI - Free Report) and American Financial Group, Inc. (AFG - Free Report) . While Selective Insurance sports a Zacks Rank #1 (Strong Buy), American Financial carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Selective Insurance surpassed estimates in three of the last four quarters, with the average surprise being 35.12%.

American Financial surpassed estimates in three of the last four quarters, with the average surprise being 32.2%.

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