Cincinnati Financial Corporation Offers 57 Years of Annual Dividend Hikes (CINF)
By: Ned Piplovic,
In addition to nearly six decades of annual dividend hikes, Cincinnati Financial Corporation (NASDAQ:CINF) has rewarded its shareholders with long-term asset appreciation and a dividend yield that outperformed peer averages.
The company’s share price has experienced a mild volatility increase over the past two years. However, the share price continues to move up on its long-term uptrend and has more than tripled since the financial crisis correction in 2009.
After languishing below the 200-day moving average (MA) since the beginning of April, the 50-day MA has crossed above the 200-day MA on September 7, 2018 and the company’s share price has traded above both moving averages since late July.
Additionally, the company’s current price-to-earnings (P/E) ratio of 13.9 is more than 20% lower than the 17.3 industry average. The P/E ratio might not be a clear sign to buy by itself. However, the P/E ratio can be a helpful sign when accompanying a steady share price growth, a long streak of dividend hikes and positive technical indicators, as it is in this case.
Pending the outcome their own analysis to confirm compatibility of CINF with their portfolio strategy, interested investors should consider taking a long position in this stock, preferably before the company’s next ex-dividend date on September 18, 2018. The company’s pay date will follow approximately four weeks later on October 15, 2018.
Cincinnati Financial Corporation (NYSE:CINF)
Headquartered in Fairfield, Ohio and founded in 1950, the Cincinnati Financial Corporation provides property casualty insurance products and operates through five business segments. The Commercial Lines Insurance segment provides coverage for commercial casualty, commercial property, commercial auto and workers’ compensation. The Personal Lines Insurance segment provides personal auto and homeowners insurance, as well as fire, inland marine, personal umbrella liability and watercraft coverages to individuals. Additionally, the Excess and Surplus Lines Insurance segment provides commercial casualty insurance that covers businesses for third-party liability. The Life Insurance segment provides term life insurance, universal life and worksite insurance products, as well as markets disability income insurance, deferred annuities and immediate annuities. Lastly, the Investments segment invests in fixed-maturity and equity investments.
The company’s current $0.53 quarterly payout is 6% above its $0.50 distribution in the same period last year. This new quarterly distribution amount converts to a $2.12 annualized payout and a 2.8% dividend yield. The current dividend yield is 14% below the company’s own 3.2% five-year average yield because the share-price growth was ahead of the pace of dividend hikes over the past several years. However, while annual dividend hikes could not keep up with share-price growth, the company still enhanced its annual dividend amount almost 30% over the past five years, which corresponds to a 5.2% average annual dividend growth rate over that period. Additionally, the company managed to maintain an average growth rate of nearly 7% per year and advanced its total annual payout nearly four-fold over the past two decades.
While slightly lower than its own five-year average, CINF’s current yield is more than 50% above the 1.79% average yield of all companies in the Property & Casualty Insurance segment, as well as 11% higher than the 2.48% average yield of the segment’s only dividend paying companies.
The company’s share price declined nearly 15% from the beginning of the trailing 12-month period before reaching its 52-week low of $66.33 on June 27, 2018. While this decline lasted nine months, the share price fully recovered in half that time and achieved a new 52-week high of $77.64 on September 6, 2018. The share price then pulled back less than 1% to close on September 10, 2018 at $77.03. This closing price was just marginally higher than it was one year earlier, 16% above its June 2018 low and 62% higher than it was five years ago.
The recovered share price provided enough support to the last several years of annual dividend hikes and the company rewarded its shareholders with positive total returns. While the total return over the past year came in at 5.7%, the three-year total return was significantly higher at 58.3% and the total return over the last five years was 87.7%.
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.