Travelers Cos. (TRV) lifts dividend by 7% & remains a premier insurance firm.

Travelers’ (NYSE:TRV) dividend was increased by 7%.  Its overall yield is 2.39%. The firm started paying a dividend in 1993.

Travelers Companies is one of the largest insurance companies in the world.  It offers a wide range of insurance products in both the personal and commercial lines. The personal lines operations involve auto and homeowners insurance. Policies are generally written by independent agents and brokers.  It also operates in the United Kingdom.  The firm is based in New York and was originally founded in 1853.

Travelers has maintained a three-year growth rate of dividends of 8.5 percent. Travelers currently ranks 3rd in dividend yield within the large cap electric financial, property and casualty insurance category. The quarterly dividend for the June payment will be $0.72 versus the prior year rate of $0.67 per share. Travelers is a member of our Top 100 Dividend Stocks.  (see below).

top-100

The dividend will be paid at the new higher rate on June 30, 2017, to shareholders of record at close of business on June 9, 2017. Travelers Cos. is currently priced at $119.95. Listed in the table below are the quarterly dividend payments since 2010.

Date Quarterly Dividend
6/9/2017 0.72
3/8/2017 0.67
12/7/2016 0.67
9/7/2016 0.67
6/8/2016 0.67
3/8/2016 0.61
12/8/2015 0.61
9/8/2015 0.61
6/8/2015 0.61
3/6/2015 0.55
12/8/2014 0.55
9/8/2014 0.55
6/6/2014 0.55
3/6/2014 0.5
12/6/2013 0.5
9/6/2013 0.5
6/6/2013 0.5
3/6/2013 0.46
12/6/2012 0.46
9/6/2012 0.46
6/6/2012 0.46
3/7/2012 0.41
12/7/2011 0.41
9/7/2011 0.41
6/8/2011 0.41
3/8/2011 0.36
12/8/2010 0.36
9/8/2010 0.36
6/8/2010 0.36
3/8/2010 0.33

Analysis of Travelers is based upon our five key quantitative factors for the Top 100 list, which include;

Category Value Score
Dividend Yield 2.39% 273
Dividend Growth (3-7 year avg) 9% 325
Forward P/E 12.73 77
S&P Financial Rating A 271
Beta 0.85 154
Total Score 1,100
% Yield 3 Year Div. Growth Rate 7 Year Div. Growth Rate BV 2017 P/BV Ratio 10 yr P/BV Low 10 yr P/BV High 5 yr low Yield % 5 yr max Yield %
2.39% 8.5 9.7 89.10 1.37 0.82 1.45 1.99% 2.65%

Positives;

  • Travelers maintains an investment grade rating of A.
  • Travelers’ current dividend yield (2.39%) is above its five-year average historical dividend yield.
  • Travelers maintains a beta of 0.85, lower than the average company.
  • Travelers’ dividend yield is above that of the S&P 500 Index.
  • Travelers has paid out a dividend consecutively for the past 24 years.

Negatives;

  • Travelers is trading toward the top of its ten-year average price/book ratio.

Latest Earnings & Overall Analysis:

Travelers issued its earnings data on April 20th. The company reported $2.16 EPS for the quarter, missing the consensus estimate by 24 cents.  Net income came in at $617 million, down from $691 million in Q4 of last year. Earnings per share were 14 cents below last year’s results. Total revenue $6.9 billion, up 4 percent year-over-year. This was above most consensus estimates. Net premiums written rose by just over 5 percent.   The firm once again raised its quarterly dividend by over 7 percent and also approved an additional $5 billion stock repurchase plan.

The quarterly results were strongly impacted by $226 million of catastrophe losses. Wind and hail storms across the United States had the most effect on results. There were over ten major wind and hail events for Q1, much higher than previous years.  But there were notable positives in the Q1 period for Travelers. The firm hit high levels of retention, at 85 percent in their domestic business insurance and 88 percent in the Bond & Specialty Insurance division.  Personal Insurance was strong as well. The firm has improved its profitability in its auto insurance lines.   The firm also made an acquisition, Simply Business.  The firm is a leading digital provider of insurance to many small businesses located within the United Kingdom.

Although the quarter was poor from many analyst viewpoints, net written premiums did come in at an all-time high of $6.5 billion in Q1.  It’s the firm’s strong retention rates and solid metrics that make the firm a standout in the industry.  The underlying combined ratio came in at just under 92 percent.  Return on equity did fall to just under 11 percent from 12.5 percent. This was the result of the above mentioned high claims along with the Ogden rate adjustment. This was the United Kingdom’s Ministry of Justice decision to reduce the discount rate applied to lump sum bodily injury payouts.

As one of three major U.S. commercial lines insurers, Travelers has been able to carve out a stable line of business especially within the property and casualty markets. It primarily works with independent agents, and generally gets solid reviews from both agents and customers. The firm’s personal lines are more susceptible to commoditization. It accounts for nearly one-third of its revenue. Its commercial lines consistently generate above 90 percent combined ratios while the personal lines are even more profitable at 97 percent.

The firm has a premier brand name within the insurance industry and is also very conservative in running its own in-house investment portfolio.  The firm has an investment grade credit rating of A.  We expect that Travelers can earn approximately $9.40 in earnings for full-year 2017.  This puts its price/earnings ratio at 12.7 times 2017 earnings expectations.  Its beta is below that of the market at 0.85

Travelers ended the quarter with holding company liquidity of $2.1 billion, $400 million more than at year-end 2016.  Its book value per share is $84.51 while adjusted book value per share is $81.56.  Thus it trades at over 1.3 times book value. This is toward the high-end of a ten-year range.  The firm has plenty of room for more dividend increases as the payout ratio is well below average. Despite the modest dividend and higher than average book value, the firm’s stability and premier industry standing qualifies the firm as one of our Top 100 stocks.  But a price pullback to the low $100s would make the stock much more attractive and higher on our ranking list.

2016 2015 2014 2013 2012
Earnings per Share 10.13 10.87 10.56 9.46 6.21
Annual Dividend 2.68 2.38 2.15 1.96 1.79
Payout Ratio 26.46% 21.90% 20.36% 20.72% 28.82%
Earnings per Share 2017 (projected) $9.40
Dividend $2.83
Payout Ratio 29.79%

Based on the firm’s stellar financial credit rating, consistent dividend growth, premier standing, and low beta, Travelers Cos. still qualifies as one of our Top 100 Dividend Stocks

Travelers Cos. Dividend Yield Chart (Click to enlarge)

Chart Explanation:  Dividend growth stocks may be viewed undervalued when the current yield is above historical readings for the past 5 years. 

One thought on “Travelers Cos. (TRV) lifts dividend by 7% & remains a premier insurance firm.

  1. It’s so hard to beat insurance companies when it comes to betting safely. The model of their business is already so regulated that they can’t really afford to make huge mistakes with their money. While this can cause a slower growth for these companies, it also means safer growth. Good buy, DivManager.

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