A while back I wrote about investing in the ‘boring’ HVAC industry. Investing in boring industries rarely gives your portfolio a “shot in the arm” in terms of dramatic capital appreciation but what it can do is provide stability and predictability in terms of tempered growth and a potential reliable source of growing dividends for decades on end.
Another industry that I like lacking general sex appeal, but I think belongs in every long term dividend growth portfolio, is the property and casualty insurance space. Of course, there’s not much that’s exciting or innovative in this sector, rather what you get is solid, long term, steady growth coupled with growing dividends which is what every long term investor should be looking for. With that being said let’s take a look at some of the names in the property and casualty insurance space.
First up, is a name that is quite familiar among long term dividend investors, The Travelers Companies, Inc. (TRV). Founded in 1853, so you already know this company has seen every economic cycle out there, TRV offers commercial and personal property, and casualty insurance products and services to businesses, government units, associations, and individuals worldwide. With a current yield of 2.2% and a trailing twelve month payout ratio of just 25.5%, TRV has the cash flow to continue paying and raising its dividend for the foreseeable future. If that doesn’t give you enough reason to consider this stock perhaps its ten year annualized dividend growth rate of 10.0% might. With a current PE of 11.8 the stock is currently trading at its five year average PE. In late 2016 the stock was trading around $105 which gave it a much more attractive price, value and yield. While a solid name in almost every sense the price seems to have run away a bit.
Next, is a lesser known company in the P&C space, AXIS Capital Holdings Limited (AXS). AXS offers up many different types of insurance products covering everything from property insurance for commercial buildings and residential premises to marine insurance covering offshore energy, cargo, fine art and even medical malpractice to name a few. AXS has a current yield of 2.2% with a very low payout ratio of just 28.1% leaving a lot of room for future payments and even growth like with TRV. Along with this safe yield, AXS also has an attractive ten year annualized dividend growth rate of 8.8%. Not too bad. With a current PE of 13.5 the stock is trading at a much lower multiple compared to its five year average. While AXS does not have the lengthy history of TRV it certainly offers up some interesting value, growth and yield.
Our next exciting stock, Endurance Specialty Holdings Ltd. (ENH) offers up the same profitable underwriting policies as the companies mentioned above. While not offering investors the juiciest of current yields coming in at just 1.6% it does sport a very safe dividend with a low payout ratio of just 30.8%. As with the other stocks mentioned, ENH offers any dividend growth investor a very safe yield. Long term dividend growth has been decent with a ten year annualized dividend growth rate of 4.3%. Nothing too stellar but it’s still growth nonetheless. ENH has a current PE of 18.9 as its stock rocketed higher several months ago after Japan’s Sompo agreed to buy ENH for $6.3 billion. Dividends are continuing to be paid out regularly by the ENH board as the company just declared a quarterly dividend of $0.38 towards the end of February.
Finally, in this round up we have an insurer that’s very familiar to most, at least here in the U.S., The Progressive Corporation (PGR). Founded in 1937, PGR offers both personal and commercial property-casualty insurance across many different areas. PGR currently offers a 1.7% yield with a 50.5% payout ratio, which seems to be the general theme of insurers offering up safe dividend payouts. Buy for the modest current yield and the prospect of future raises. Speaking of raises, PGR has a very impressive ten year annualized dividend growth rate of 32.0%. That’s an accelerated dividend growth rate by any measure. With a current PE of 22.4, PGR is trading well above its five year average as its stock climbed significantly since late 2016. Perhaps waiting for a pullback in share price might be prudent at this time.
Of course, there are many, many names in the property and casualty insurance space. Perhaps, I’ll highlight another group of stocks in this space in the future. I think there’s good reason this industry has so many players, it’s very profitable. As evidenced by the four stocks profiled above, the P&C insurance space offers up very some safe yield for those looking to add a stable dividend payer to their portfolio.
What do you think about the P&C industry? Do you own any insurance stocks in your own portfolio? Please let me know below.
Disclosure: Long NONE