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American Financial (AFG) Board Approves Special Dividend

 The board of directors of American Financial Group AFG recently gave a nod to a special cash dividend of $2.00 per share. The company has been paying out special dividends since 2012.

This Zacks Rank #2 (Buy) property and casualty insurer estimate spending $174 million for the special dividend, which is well-supported by its strong financial position. With the latest approval, the company will be paying out 12 special dividends in nine years. Shareholders of record as of Dec 21 will receive the special dividend on Dec 29.

Co-CEOs Carl H. Lindner III and S. Craig Lindner stated, “Following the payment of this special dividend, our excess capital remains at a level which affords us the financial flexibility to grow our business organically and through acquisitions and start-ups that meet our target return thresholds, and to make opportunistic repurchases of AFG’s stock.”

American Financial, a niche player in the P&C and annuity markets, has traditionally maintained moderate adjusted financial leverage with good cash flow and significant excess capital. The robust operating profitability at the P&C segment, stellar investment performance, and effective capital management supports effective shareholders return. In each of the last 14 years, the company has successfully increased its dividends apart from paying out special dividends and buying back shares. Its dividend yield of 2.3% betters the industry average of 0.4%.

Consistent price increase in the P&C business, better industry fundamentals, a high renewal ratio, favorable combined ratio, and strong capital management should help it maintain the streak.

Shares of American Financial have gained 20.1% year to date, outperforming the industry’s rise of 6%. The company’s superior underwriting discipline and sound capital structure should help it retain the momentum.

Recently, RLI Corp.’s RLI board of directors approved a special dividend of $2.00 per share while the board of directors of Erie Indemnity Company ERIE approved a special one-time cash dividend of $2 on each Class A share and $3 on each Class B share. The Hanover Insurance Group’s THG board of directors approved a 7.7% hike in the quarterly dividend.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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