American Financial To Share More Profit With Stockholders

American Financial Group Inc. (NYSE:AFG) announced that its board of directors recently approved a 12% increase in its annual dividend. The insurer will now pay an annual dividend of $1.25 per share compared with $1.12 paid earlier.

The increased dividend will be paid on a quarterly basis of 31.25 cents per share, starting Oct 2016. Based on yesterday’s closing price of $73.68, the new annualized dividend of $1.25 per share will yield 1.7%.

American Financial has an impressive track of enhancing shareholder value by increasing dividends every year. The recent increase marks 11 consecutive years of dividend hike by the insurer. American Financial has raised its dividend at five-year CAGR of 12%. This makes it an attractive pick for yield-seeking investors.

With about 86.9 million shares outstanding as of Jun 30, 2016, the company is likely to pay out $108.6 million in annual dividend or $27.1 million in quarterly dividend. This bears testimony to a sustained solid operational performance by the company supporting a healthy capital position. Notably, this Zacks Rank #2 (Buy) property and casualty insurer has outperformed our expectations in two of the last four quarters.

Also, the Zacks Consensus Estimate has been trending upward following the company’s solid second-quarter 2016 performance. The consensus estimate increased 1% to $5.65 for 2016 and 2% to $5.95 for 2017. We expect the Zacks Consensus Estimate to move further north as analysts raise their estimates to incorporate the impact of the recent increase in dividend.

Several other insurers also have recently rewarded their shareholders with a dividend hike. While Primerica, Inc. (NYSE:PRI) approved a 5.9% hike in its quarterly dividend, First American Financial Corporation (NYSE:FAF) increased its quarterly cash dividend by 31%.

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Stock to Consider

Investors interested in the insurance industry can consider Allied World Assurance Company Holdings (NYSE:AWH) , sporting a Zacks Rank #1 (Strong Buy).