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First American Financial Rewards Investors, Hikes Dividend

In a bid to return more value to its shareholders, the board of directors of First American Financial CorporationFAF recently approved an 11.8% hike in its quarterly dividend. The company will now reward investors with a dividend of 38 cents per share compared with 34 cents paid on Jun 15, 2017. Shares gained 1.03% in the last trading session, reflecting investors' appreciation of the company's shareholder-friendly move.

Shareholders on record of Sep 8, will have the meatier dividend in their pockets on Sep 15. Based on the closing share price of $49.04 as of Aug 16, the increased payout translates into a dividend yield of 3.1%, better than its industry's average of 2.6%.

Backed by its operating strength, this Zacks Rank #1 (Strong Buy) property and casualty insurer has a solid track record of increasing dividend each year. The company has witnessed a 5-year CAGR (2012-2017) of 36.56% in dividend payout.

With about 112.2 million shares outstanding at the end of the second quarter, the company has to dish out about $42.6 million quarterly or $170.5 million annually as dividend. The payout is supported by the company's strong capital position.

According to chief executive officer Dennis J. Gilmore, the increase in the company's dividend instills confidence among investors in the long-term objectives of its business. This also portrays the company's intention to offer steadfast returns to its shareholders.

First American Financial has a strong capital management policy in place. Its commitment toward increasing dividend regularly makes the stock an attractive to yield-seeking investors.

The company's initiatives are supported by its solid cash flow generation, which in turn, is driven by consistent operational strength. The company's cash balance as of Jun 30, 2017 was $116 million (up 16% from the year end 2016) and cash flow from operations was $234.6 million in the first six months of 2017 (up 60.3% year-over year). By virtue of its intelligent capital management, the company returned 26.8% to its investors from 2012 to 2016.

Several insurers reward their shareholders with dividend hikes. Recently, United Fire Group Inc. UFCS increased its dividend payout by 12% to 28 cents per share.

Share Price Movement

Shares of First American Financial have gained 38.88% year to date, outperforming the industry's growth of 9.07%. Higher insurance sales, core earnings growth, and effective capital deployment are expected to drive the stock higher in the future.

Other Stocks to Consider

Some other stocks from the insurance industry worth considering are Markel Corporation (MKL) and Mercury General Corporation (MCY). Each of these stocks sports a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here.

Markel Corporation markets and underwrites specialty insurance products in the United States and internationally. The company delivered positive surprises two out of the last four quarters, with an average beat of 21.06%

Mercury General Corporation engages in writing personal automobile insurance in the United States. The company delivered positive surprises in three of the last four quarters, with an average beat of 1.06%.

Share Price Movement

Shares of First American Financial have gained 38.88% year to date, outperforming the industry's growth of 9.07%. Higher insurance sales, core earnings growth, and effective capital deployment are expected to drive the stock higher in the future.

Other Stocks to Consider

Some other stocks from the insurance industry worth considering are Markel Corporation (MKL) and Mercury General Corporation (MCY). Each of these stocks sports a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here.

Markel Corporation markets and underwrites specialty insurance products in the United States and internationally. The company delivered positive surprises two out of the last four quarters, with an average beat of 21.06%

Mercury General Corporation engages in writing personal automobile insurance in the United States. The company delivered positive surprises in three of the last four quarters, with an average beat of 1.06%.

Share Price Movement

Shares of First American Financial have gained 38.88% year to date, outperforming the industry 's growth of 9.07%. Higher insurance sales, core earnings growth, and effective capital deployment are expected to drive the stock higher in the future.

Other Stocks to Consider

Some other stocks from the insurance industry worth considering are Markel Corporation MKL and Mercury General Corporation MCY . Each of these stocks sports a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .

Markel Corporation markets and underwrites specialty insurance products in the United States and internationally. The company delivered positive surprises two out of the last four quarters, with an average beat of 21.06%

Mercury General Corporation engages in writing personal automobile insurance in the United States. The company delivered positive surprises in three of the last four quarters, with an average beat of 1.06%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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