Assurant (NYSE:AIZ), a specialty insurance company based in Atlanta, announced this month that it was increasing its fourth-quarter dividend by 3% to 72 cents per share. This marks the 19th consecutive year that the firm has increased its annual payout.
This is a company that has largely flown under the radar for most investors, but it deserves notice for more than just its dividend. Let’s take a look to see if Assurant stock should be on your radar.
A specialty insurer for a “connected world”
At its current stock price, Assurant’s recent quarterly dividend increase results in a dividend yield of about 1.8%. That works out to an annual distribution of $2.88 per share. As mentioned, this is the 19th straight year that the payout has gone up, which is testament to the company’s earnings power, and with a low payout ratio of 20%, it is in a good position to keep the streak going.
As a specialty insurer, Assurant occupies a different niche than the typical property and casualty insurance companies. In its Global Lifestyle business, it offers insurance to protect consumer purchases of digital devices like mobile phones and other types of electronics.
Assurant protects some 164 million mobile devices, appliances and electronics around the world. In short, the company says it “supports the businesses that are advancing the connected world for their customers.” It also offers insurance for extended service contracts, vehicle protection, credit protection and other major purchases.
The company’s other business line is called Global Housing, through which it offers insurance for mobile and manufactured homes, floods and vacation rentals, among other things.
Assurant is coming off a huge third quarter in which growth in its mobile phone insurance business fueled a 7% year-over-year jump in adjusted EBITDA in the Lifestyle business. Meanwhile, the net earned premiums in the company’s Housing business were up 23%. Overall, adjusted EBITDA for the company, excluding reportable catastrophes, was up 49% in the quarter.
“The combined cash generation of our Lifestyle and Housing businesses remains a key differentiator for Assurant,” President and CEO Keith Demmings said.
The company has $1.1 billion in operating cash and $713 million in free cash flow, which allows it to continue to fund its dividend and invest in its growth.
Stock is up 28% this year
Assurant has been able to carve out a unique and successful niche within its markets, and its outlook for fiscal 2023 is to finish with adjusted EBITDA growth in the mid-to-high teens, up from previous projections of single-digit growth.
The company’s performance has driven its stock price higher, as it is up some 27% year to date. Over the last 10 years, it has posted an average annual return of 10%, and analysts expect continued success. Assurant is listed as a consensus buy with a median 12-month price target of $191, which is some 20% higher than the current stock price.
The stock is also pretty cheap, with its price-to-earnings (P/E) ratio down to 16 from 27 on June 30. Its forward P/E ratio is just 10, while its price-to-sales (P/S) ratio is low at 0.8.
With the momentum of its “connected world” strategy, Assurant should be able to maintain its robust growth rates as the world becomes more and more digital — and connected. It looks like a solid buy, not just for its dividend, but for its overall growth potential.
Disclaimer: All investments involve risk. In no way should this article be taken as investment advice or constitute responsibility for investment gains or losses. The information in this report should not be relied upon for investment decisions. All investors must conduct their own due diligence and consult their own investment advisors in making trading decisions.
