Friday, August 21, 2009

Cincinnati Financial’s Dividend Surprise

Cincinnati Financial (CINF) surprised investors in a positive way, after the provider of property, casualty, personal, and life insurance products to businesses and individuals in the United States upped its quarterly dividend from 39 to 39.5 cents/share.

Kenneth W. Stecher, president and chief executive officer, commented, "The company has consistently increased dividends for 48 years, and the board of directors chose to continue that record for the benefit of our shareholders. This action demonstrates their confidence in our strong capital, liquidity and financial flexibility and in our initiatives to improve earnings performance."

The company last increased its dividend in 2008. If it hadn’t raised it in 2009, the Cincinnati, Ohio based insurer would have been booted out of both the dividend aristocrats and dividend achievers indexes.

The company is a hold for me right now, as it has pretty disappointing short-term EPS prospects. Its insurance premiums are under pressure on increased competition. It might not be able to cover its dividend payment by a factor of 2 until 2010 or 2011.
Half of the company’s investment portfolio was allocated to equities in 2007. The losses in the stock markets and an initiative to reduce equity exposure lead to a decrease in the equity exposure to 33% in 2008.

Three other companies announced dividend hikes over the past week as well.

Getty Realty Corp. (GTY), which engages in the ownership and leasing of retail motor fuel and convenience store properties, and petroleum distribution terminals, increased its quarterly dividend from 47 to 47.50 cents per share. This dividend achiever currently yields 8.50%.

ITC Holdings Corp. (ITC), which invests in the electricity transmission grid to improve electric reliability, improve access to markets, and lower the overall cost of delivered energy, increased its quarterly dividend by 4.90% to 32 cents per share. This is the fourth consecutive dividend increase for ITC Holdings Corp. since the company went public in 2005. The stock currently yields 2.60%.

Nordson Corporation (NDSN), which manufactures equipment used for precision dispensing, testing and inspection, and surface preparation and curing., increased its quarterly dividend by 4.10% to 19 cents per share. This represents the 46th consecutive year of annual dividend increases for this dividend achiever. The stock currently yields 1.50%.

Full disclosure: Long CINF

Relevant Articles:

- Should you sell after a dividend freeze?
- Chubb (CB) Dividend Stock Analysis
- 7 Dividend Raisers during a financial crisis
- Chevron (CVX) Raises Dividends; MLPs follow suit

Popular Posts