First American Financial Hits 52-Week High On Q2, Dividend

On Aug 23, 2016, shares of First American Financial Corporation (NYSE:FAF) hit a 52-week high of $42.78, driven by strong second-quarter 2016 results as well as a hike in dividend payout. About 0.5 million shares exchanged hands in the last trading session and the stock finally closed at $42.58. Year to date, the stock has returned 18.60%, comparing favorably with 6.99% by the S&P 500.

In the second quarter, First American Financial delivered operating earnings per share of 92 cents that surpassed the Zacks Consensus Estimate by 13.6%. The bottom line also improved 8% year over year. This Zacks Rank #2 (Buy) property and casualty insurer delivered positive surprises in three of the last four quarters, with an average beat of 10.7%.

Better performance was driven by solid results at its Title segment. The specialty insurance segment also improved on the back of higher premiums earned in the home warranty business line.

The top line too fared well. Rise in direct premiums and escrow fees, information and other and net investment income contributed to the upside.

Average revenue per direct order closed improved due to an increase in purchase, refinance, commercial and other transactions.

With respect to balance sheet strength, while cash and cash equivalents increased at quarter end, the long-term debt level declined from 2015 end. The debt-to-equity ratio exhibited an improvement of 140 basis points.

Additionally, last week, the company’s board of directors approved a 31% hike in its dividend. The company will now pay a quarterly dividend of 34 cent. More importantly, yield remains better than the industry average. This makes the stock an attractive pick for yield-seeking investors.

The Zacks Consensus Estimate saw an uptrend as estimates moved north over the last 30 days driven by the positives. The same moved up 2.1% to $2.97 for 2016 and 1.3% to $3.03 for 2017. The expected long-term growth is currently pegged at 9.3%.

Other Stocks to Consider

Investors interested in the property and casualty industry can also look at National Interstate Corporation (NASDAQ:NATL) , Allied World Assurance Company Holdings, AG (NYSE:AWH) and Argo Group International Holdings, Ltd (NASDAQ:AGII) . Each of these stocks shares the Zacks Rank with National Interstate.