The big story with insurance companies is the float. Essentially, an insurance company collects premiums, but doesn’t have to pay out any money until there are claims. It can invest that cash, called the float, until it is needed for claims. This can create a very powerful income stream.
Cincinnati Financial (CINF -0.12%) and RLI (RLI -0.43%) have used that foundation to build incredible dividend track records, as both are Dividend Kings with over 50 annual dividend increases. If you are looking for reliable dividend stocks, you’ll want to get to know these two insurance companies (and may even buy one of them).
Image source: Getty Images.
Cincinnati Financial: 66 years and counting
Cincinnati Financial is based in Ohio, as its name implies. The company’s website states that it is “among the 25 largest property casualty insurers in the nation, based on net written premiums.” So it is a material business, but it isn’t exactly a huge insurer. The market cap is $24 billion. The dividend yield is currently around 2.3%, as of this writing, which compares favorably to the S&P 500 index‘s (^GSPC +0.73%) tiny 1% yield. The big dividend story, however, is that the company has increased its dividend annually for a huge 66 years.
Today’s Change
(-0.12%) $-0.20
Current Price
$161.95
Key Data Points
Market Cap
Day’s Range
$160.95 – $162.74
52wk Range
$150.00 – $194.81
Volume
559.3K
Avg Vol
706.3K
Dividend Yield
2.28%
What investors need to keep an eye on with Cincinnati Financial is its investment portfolio. Most insurance companies focus on bonds, but Cincinnati Financial has material equity exposure, accounting for around 40% of its investment portfolio. By comparison, Progressive’s (PGR -0.31%) equity exposure is just 5%. Although Cincinnati Financial is clearly a reliable dividend stock with a decent yield today, a bear market would likely open up a more attractive buying opportunity. Indeed, the company’s equity focus is likely to prompt investors to dump its shares during a market downturn, despite its impressive dividend history.
RLI: 51 years and counting (with an occasional bonus)
With a roughly $5 billion market cap, RLI is much smaller than Cincinnati Financial. While the majority of its business falls into the property and casualty space, it describes itself as a specialty insurer. For example, it has a sizable marine insurance business and also sells earthquake insurance. It probably needs a bit more monitoring than a business like Cincinnati Financial.
That said, the equity component of RLI’s portfolio is roughly 20%. That’s higher than many insurers, but not nearly as high as Cincinnati Financial. The 51-year streak of annual dividend increases highlights that the company is run well. However, the yield is only about 1.3%, so it isn’t exactly a high-yield stock. But it has a history of paying sizable special dividends, including $2 per share in 2023, 2025, and 2026. But it paid an even larget $4 per share in 2024 and an almost shockingly large $7 per share in 2022.
Today’s Change
(-0.43%) $-0.24
Current Price
$55.94
Key Data Points
Market Cap
Day’s Range
$55.36 – $56.59
52wk Range
$45.42 – $67.00
Volume
839.3K
Avg Vol
746.2K
Dividend Yield
1.19%
You obviously can’t count on a special dividend, but RLI clearly has a plan to return value to shareholders through special dividends when it does well. And that can materially improve the income dynamics for long-term dividend investors.
Wish list or buy list?
Of these two Dividend King insurers, RLI looks like the more attractively valued stock. Its price-to-book ratio is around 2.9x, well below its five-year average of 4x. Cincinnati Financial’s P/B ratio is roughly 1.5x, which is just a touch below its long-term average of nearly 1.6x. So, if you are on the lookout for a reliable dividend stock, RLI could be worth putting on your buy list. But Cincinnati Financial is probably better left on the wish list, just in case there’s a bear market.
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