Travelers Offers Shareholders 7% Quarterly Dividend Boost (TRV)
By: Ned Piplovic,
Travelers Companies, Inc. (NYSE: TRV) will continue a track record of more than a dozen years of consecutive dividend increases with its next quarterly dividend boost of nearly 7%.
With the increased payment, Travelers’ forward dividend yield sits at 2.4%. In addition, Travelers also offers steady share price growth over the last five years of over 50%. Combined with the rising dividend income, total return on shareholder investment over the past five years comes out to nearly 70%.
The ex-dividend date for the upcoming increased distributions will be on June 7, 2018, with the actual pay date scheduled for June 29, 2018. As Travelers’ share price is currently on a short-term downward trend, risk-averse investors may want to wait for a better indication that the bottom of this trend has been reached before considering an investment in the company. However, investors who are more tolerant of risk and optimistic about TRV may want to consider taking full advantage of the currently discounted share price and the upcoming ex-dividend date.
Travelers Companies, Inc. (NYSE:TRV)
Based in New York, New York and founded in 1853, the Travelers Companies, Inc. provides a range of property and casualty insurance products and services through three business segments — Business Insurance, Bond & Specialty Insurance and Personal Insurance. Travelers Companies distributes its products primarily through 13,500 independent agents and brokers in the United States, Canada, the United Kingdom, Ireland and Brazil. As of December 31, 2017, the company had approximately $100 billion in total assets, $24 billion in shareholders’ equity and generated a total revenue of approximately $24 billion in 2017.
Over the past year, Travelers’ share price has experienced quite the roller coaster ride. From the start of the trailing 12-months through early September 2017, TRV’s share price declined nearly 9% to reach a 52-week low of $113.76, the lowest price for many months. After bottoming out, TRV gained more than 30% before reaching its 52-week high of $150 on February 2, 2018. With the overall market pullback since then, TRV shares have fallen close to 15% to close at $128.52 on May 31, 2018.
Though this share price movement pattern over the past 12 months might seem erratic, it is not much different the stock’s five-year history, shown below. Over that period, the share price fluctuated up and down, but has remained within 10% to 15% of the rising long-term trendline.
The current increase marks the 13th consecutive year that Travelers offered its shareholders an annual dividend boost. In 2004, the company cut its quarterly dividend from $0.29 to $0.22 as a result of its altered quarterly distribution schedule – pay dates moved from being in January, April, July and October to March, June, September and December. Despite the cut, Travelers paid out two additional dividends that year that actually made its 2014 annual payout higher than in 2015.
Since the quarterly dividend cut of 2004, Travelers has provided its shareholders with a dividend boost each year, with the latest quarterly increase slated to be from $0.72 to $0.77 per share, a 6.9% increase, or $3.08 per year. Taking the 2004 dividend levels and comparing them to now, Travelers has grown its annual dividend payout amount 250% over the past 13 years, which is equivalent to an average compounded growth rate of nearly 10% per year.
Travelers’ 2.4% yield is 9% higher than the company’s own 2.2% five-year average yield. Also, while the 2.4% yield is approximately 30% below the 3.1% average yield of the entire Financials sector, TRV’s yield outperforms the 1.86% average yield of the company’s peers in the Property & Casualty Insurance industry segment by 29%.
Despite the share price volatility over the last year and the decline between February and April 2018, dividend income and share price appreciation combined to deliver a 5% return on shareholder investment over the past 12 months. Over the last three and five years, respectively, total return has been a solid 35% and 68%.
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