Insuring Your Portfolio With Insurance Stocks
A while back I wrote about investing in the ‘boring’ HVAC industry. Investing in boring industries rarely gives your portfolio a “shot in the arm” in terms of dramatic capital appreciation but what it can do is provide stability and predictability in terms of tempered growth and a potential reliable source of growing dividends for decades on end.
Another industry that I like lacking general sex appeal, but I think belongs in every long term dividend growth portfolio, is the property and casualty insurance space. Of course, there’s not much that’s exciting or innovative in this sector, rather what you get is solid, long term, steady growth coupled with growing dividends which is what every long term investor should be looking for. With that being said let’s take a look at some of the names in the property and casualty insurance space.
First up, is a name that is quite familiar among long term dividend investors, The Travelers Companies, Inc. (TRV). Founded in 1853, so you already know this company has seen every economic cycle out there, TRV offers commercial and personal property, and casualty insurance products and services to businesses, government units, associations, and individuals worldwide. With a current yield of 2.2% and a trailing twelve month payout ratio of just 25.5%, TRV has the cash flow to continue paying and raising its dividend for the foreseeable future. If that doesn’t give you enough reason to consider this stock perhaps its ten year annualized dividend growth rate of 10.0% might. With a current PE of 11.8 the stock is currently trading at its five year average PE. In late 2016 the stock was trading around $105 which gave it a much more attractive price, value and yield. While a solid name in almost every sense the price seems to have run away a bit.
Next, is a lesser known company in the P&C space, AXIS Capital Holdings Limited (AXS). AXS offers up many different types of insurance products covering everything from property insurance for commercial buildings and residential premises to marine insurance covering offshore energy, cargo, fine art and even medical malpractice to name a few. AXS has a current yield of 2.2% with a very low payout ratio of just 28.1% leaving a lot of room for future payments and even growth like with TRV. Along with this safe yield, AXS also has an attractive ten year annualized dividend growth rate of 8.8%. Not too bad. With a current PE of 13.5 the stock is trading at a much lower multiple compared to its five year average. While AXS does not have the lengthy history of TRV it certainly offers up some interesting value, growth and yield.