American Financial Group is a dividend powerhouse
Double digit dividend growth and multiple special dividends annually
In a week with many special dividend announcements we take a closer look at p&c insurer American Financial Group (AFG). This week American Financial Group announced its second special dividend this year. A $4.00 per share dividend will be paid next month, yielding 2.88% at the current stock price of $138.77.
We are surprised that this stock, also one of the Dividend Heroes, has not hit new highs in the market earlier, with the stock now finally approaching its all time high. Is everyone finally waking up?
And wouldn’t Warren Buffett be interested in this dividend growth and special dividends machine? (for more on this check the Youtube video on AFG below).
Founded in 1959 and based in Cincinnati, AFG specializes in property and casualty insurance as well as annuity products. Through its Great American Insurance Group, AFG covers niche markets like agriculture, marine, and excess liability. This focus on specialty insurance means less competition and higher resilience in volatile markets.
AFG has built its business around niche insurance products and prudent risk management. By offering specialized products, AFG maintains pricing control and profitability while avoiding over-saturated segments. They also provide retirement products through fixed and indexed annuities, offering additional financial stability.
DIVIDEND GROWTH + SPECIAL DIVIDENDS MONSTER
Here’s what sets AFG apart for investors: it’s a dividend growth monster. AFG has increased its dividend annually for nearly two decades with an average dividend growth of more than 12% annually in the last 10 years. In 2024 alone, AFG rewarded shareholders with an impressive 12.7% dividend hike, plus two special dividends totaling $6.50 per share!
This consistent growth reflects strong management and disciplined capital allocation. The best thing is that American Financial has a 2.4% regular dividend yield and a much higher annual dividend yield if we include all the special dividends. For 2024 the total yield is 7.3% if we add the $6.50 per share special dividend to the regular quarterly payment of 80 cents per share.
AFG is unique with a combination of double digit annual dividend hikes PLUS multiple big special dividends every single year.
A quick look at some key financial metrics learns us that American Financial Group has an estimated p/e of 12.7 for 2024. The regular annual dividend payment is estimated at $268 million with a total dividend payment (including special dividends) estimated at $771.5 million for this year vs. a net income estimated at $914 million or $10.93 per share.
The expense ratio for American Financial was 28.8% in 2023 and is expected to be 28.1% in 2024 based on analyst estimates. Moreover AFG has a combined ratio of more than 90% for both 2023 and 2024 (estimated). Last but not least the book value was $50.93 per share at the end of 2023 and is expected to jump to $55 for 2024. Out of the 7 analysts that follow the stock, 2 have a ‘buy’ opinion with 5 professionals rating the stock a ‘hold’ as of November 9, 2024.
Do you have a position in American Financial Group or perhaps have a strong opinion about this stock? Please let us know in the comments below!
Disclaimer: The information provided here is for informational purposes only and should not be considered financial advice. Investors should conduct their own research or consult with a financial advisor before making any investment decisions.