Dividend Aristocrat Cincinnati Financial Corporation Delivers 45% One-Year Total Return (CINF)
By: Ned Piplovic,
In addition to nearly six decades of annual dividend hikes and a Dividend Aristocrat designation, Cincinnati Financial Corporation (NASDAQ:CINF) delivered a combined total return of more than 45% over the trailing one-year period.
Despite taking a pause in its steep growth trend and trading relatively flat for more than two years starting in June 2016, Cincinnati Financial Corporation’s share price rose more than five-fold since the financial crisis correction in 2009. However, the growth rate increased in mid-2018 and the share price advanced more than 40% over the past 12 months.
After dropping both moving averages (MAs) on the decline to its 52-week low in late June 2018, Cincinnati Financial Corporation’s share price reversed course and rose above both moving averages by the end of July. The 50-day moving average followed the share price and broke above the 200-day average by early September 2018. While the share price continued to cross each other several times until mid-January 2019, both remained steadily above the 200-day average. Finally, the share price crossed above the 50-day moving average on January 18, 2019, and has continued to rise away from both moving averages. The 50-day average also continued to rise and is currently nearly 12% above its 200-day counterpart.
Additionally, the company’s current price-to-earnings (P/E) ratio of 16.2 is significantly lower than the Property & Casualty Insurance industry’s P/E ratio of more than 25%. The P/E ratio by itself can be a misleading indicator. However, when accompanied by a steady share price growth, a long streak of dividend hikes and positive technical indicators — like in this case — the P/E ratio can be a helpful sign.
As always, interested investors should consider taking a long position in this stock only after the completion of their own analysis to confirm compatibility of CINF with their portfolio strategy. However, investors who find this Dividend Aristocrat stock appealing and decide to take a long position, would be well-advised to make their move before the company’s next ex-dividend date on June 18, 2019, to claim eligibility for the upcoming dividend payouts. The company will distribute the next round of dividend distributions on the July 15, 2019, pay date.
Company Name, Inc. (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 $0.56 quarterly payout is 5.7% higher than the $0.53 distribution from the same period of the previous year. This new quarterly payout amount is equivalent to a $2.24 annualized distribution, which corresponds to a 2.2% forward dividend yield. The strong share price appreciation over the past few years suppressed the current yield to nearly 27% below the company’s own 3.06% five-year average yield. However, CINF’s current yield outperformed the 1.5% simple average yield of the company’s peers in the Property & Casualty Insurance segment by nearly 50%.
While annual dividend hikes could not keep pace with share price growth, the company still has an impressive dividend growth streak that make the Cincinnati Financial Corporation a Dividend Aristocrat. A Dividend Aristocrat is any S&P 500 company with a market capitalization of at least $3 billion that has boosted its annual dividend for at least 25 consecutive years. Currently, only 57 companies meet all requirements to achieve the Dividend Aristocrat status. CINF’s current streak of 58 consecutive annual dividend hikes is more than double the Dividend Aristocrat minimum requirement of 25 years, which makes CINF also a Dividend King. Dividend Kings are an even more exclusive group of only 13 Dividend Aristocrat companies that have boosted their annual dividend for at least 50 consecutive years.
Just over the past two decades, the CINF enhanced its annual dividend payout 265%. This advancement corresponds to an average annual growth rate of 6.7%. In addition to the long dividend growth, the company also has distributed special year-end dividends in 2015 and 2017 equal to the amount of the regular dividend distribution for that year.
The company’s share price entered the trailing 12-month period on a slight downtrend and declined 5.6% in the first three weeks. However, after reaching its 52-week low of $66.33 on June 27, 2018, the share price reversed trend and embarked on an uptrend for the remainder of the 12 months with just two minor dips along the way. While affected only marginally by the overall market correction in December 2018, CINF’s share price recovered from the December dip by the end of January.
The share price continued its uptrend until it gained more than 50% above the June 2018 low and closed at its new all-time high of $99.75 on June 4, 2019. This closing price marked a 42% gain over the trailing 12 month period and was more than double the price level five years ago.
While the dividend rose again in 2019, the share contributed 93% of the 45% total gains over the past 12 months. Furthermore, the company delivered a total gain of almost 54% over the last three years. Also, the shareholders enjoyed a total return of 128% over the past five years, which more than doubled their investment over the five-year period.
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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.