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American Financial (AFG) Board Okays 12.5% Dividend Increase

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The board of directors of American Financial Group, Inc. (AFG - Free Report) recently approved a 12.5% hike in its quarterly dividend. This Zacks Rank #1 (Strong Buy) insurer will pay out $2.52 per share compared with $2.24 per share paid in July 2022.

The hiked quarterly dividend of 63 cents will be paid beginning October 2022. Based on the closing share price of $136.32 as of Aug 17, the increased payout translates to a dividend yield of 1.8%, better than the industry average of 0.4%.

The recent dividend hike marks the 17th consecutive increase, reflecting operational excellence and commitment to return value to its shareholders. The company increased its dividend nearly four times over a decade. AFG believes returning excess capital to shareholders in the form of dividends is an important and effective component of capital management strategy.

The insurer has also paid out special dividends 18 times in the last 10 years. AFG has also been buying back shares. It bought back $5 million worth of shares in the first half of 2022.  The insurer expects to have $400 million to $500 million of excess capital available for potential share repurchases or additional special dividends through the end of 2022.

American Financial, a niche player, has traditionally maintained moderate adjusted financial leverage with good cash flow and significant excess capital. The robust operating profitability at the P&C segment, the stellar investment performance and effective capital management support shareholder returns.  

A consistent price increase in the P&C business, better industry fundamentals, a high renewal ratio, a favorable combined ratio and strong capital management should help American Financial maintain the streak.

Shares of AFG have lost 0.7% year to date, against the industry’s rise of 2.4%. Superior underwriting discipline and a sound capital structure should help it bounce back.

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Other Stocks to Consider

Some other top-ranked stocks from the insurance industry are W.R. Berkley Corporation (WRB - Free Report) , Arch Capital Group (ACGL - Free Report) and ProAssurance Corporation (PRA - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

W.R. Berkley’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 29.95%. Year to date, W.R. Berkley stock has gained 23.9%.

The Zacks Consensus Estimate for WRB’s 2022 and 2023 earnings per share indicates year-over-year increases of 50.6% and 10.4%, respectively.

Arch Capital’s earnings surpassed estimates in three of the last four quarters and missed in one, the average beat being 33.64%. Year to date, ACGL has gained 6.9%.

The Zacks Consensus Estimate for ACGL’s 2022 and 2023 earnings implies a 29.6% and 14.8% year-over-year increase, respectively.

The bottom line of ProAssurance surpassed earnings estimates in three of the last four quarters and missed in one, the average beat being 150.9%. Year to date, the insurer has lost 8.8%.

The Zacks Consensus Estimate for ProAssurance’s 2022 and 2023 earnings has moved 16.9% and 13.9% north, respectively, in the past seven days.

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