American Financial Group Inc. (AFG - Free Report) has once again cheered its investors by instituting an annual dividend hike of 12%. The board of directors approved the new dividend of $1.40 per share (or quarterly dividend of 35 cents per share), up from earlier dividend of $1.25 per share (or 31.25 cents per share paid quarterly).
Based on the closing price of $101.89 as of Aug 23, the increased dividend translates to a yield of 1.37%.
The dividend hike comes on the back of American Financial’s strong balance sheet and ability to generate significant cash flows. American Financial has regularly been increasing dividends for the past several years. It has increased its dividend at a five-year CAGR of 41.1%. The recent hike marks the 12th straight increase.
With about 89.8 million shares outstanding at the end of second-quarter 2017, the company needs to dish out $31.4 million quarterly or $125.7 million annually.
The recent dividend action further cements investors’ confidence in the property & casualty insurer. Returning excess capital to shareholders through dividends is a key component of the company’s capital management strategy. A strong operational performance aided the company to pay a special dividend of $1.50 per share in the second quarter of 2017.
Time and again, companies have resorted to hiking dividends to restore shareholders’ faith. Recently, First American Financial Corporation (FAF - Free Report) rewarded investors with a hike of 11.8% in its quarterly dividend.
Zacks Rank and Share Price Movement
American Financial Group carries a Zacks Rank #3 (Hold). Shares of American Financial have outperformed the industry in a year’s time. While American Financial Group’s shares have gained 36.88%, the industry has registered an increase of 19.74 %. A strong balance sheet and disciplined capital management are expected to drive the stock in the future.
Stocks to Consider
Some better-ranked stocks from the insurance industry are Atlas Financial Holdings, Inc. (AFH - Free Report) and Markel Corporation (MKL - Free Report) . Each of these stocks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Atlas Financial Holdings engages in underwriting commercial automobile insurance policies in the United States. The company delivered positive surprises in two out of the last four quarters, with an average beat of 57.94%.
Markel Corporation markets and underwrites specialty insurance products in the United States and internationally. The company delivered positive surprises two out of the last four quarters, with an average beat of 21.06%.
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