Property and casualty insurer,
Cincinnati Financial Corp.
) has announced a 0.5 cent hike in its quarterly dividend to 40.75
cents per share. The dividend is payable on October 15, 2012, to
shareholders of record as of September 9, 2012.
Following this dividend hike, shares of Cincinnati Financial
yield approximately 4.12%. Management has increased the dividend
every year for the past 51 years, with an average annual increase
of 7% over the last five years.
Cincinnati's annual dividend comes to $1.63 per share. The
company last increased its dividend by 0.25 cents in October
The continuous dividend payment is supported by Cincinnati's
strong capital and continuous cash flow generation. The company had
over $1 billion in cash and marketable securities as of June 2012.
It targets a debt-to-total-capital ratio of less than 20%. At the
end of 2011, this ratio was 15.0% compared with 14.3% at the end of
Cincinnati's Board of Directors is committed to rewarding
shareholders directly through cash dividends and by authorizing
share repurchases. We are impressed by the company's efforts to
maintain the trend even after an economic downturn, thereby
preserving shareholders' income. Given the company's track record,
we expect it to keep increasing dividends in the future as
Though Cincinnati has been facing a top-line compression over
the recent years mainly due to soft market pricing, it earned
higher premium revenues in the second quarter of 2012. This
reflects a gradually improving insurance pricing environment, along
with gains from improvement initiatives taken by the company.
In the recently reported second quarter of 2012, Cincinnati
recorded operating earnings of 17 cents per share, striding ahead
of the Zacks Consensus Estimate of 11 cents per share. Earnings
rebounded from a loss of 58 cents incurred in the year-ago
We believe in the near term, the stock will be helped by
dividend increases and stock buyback activities, with actual
business growth remaining subdued.
The company ranks among the top 25 leading U.S. property and
casualty insurer, and carries an A+ rating from A.M. Best. It
) among others.
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Cincinnati currently retains a Zacks #3 Rank, which translates into
a short-term Hold rating. We also maintain our long-term "Neutral"
recommendation on its shares.