This 9%-Yielder Has Paid 146 Consecutive Dividends
Saturday, January 19, 2012
Printer-Friendly | PDF Version | Whitelist Us  | Also visit StreetAuthority

This 9%-Yielder Has Paid 146 Consecutive Dividends

-- By Carla Pasternak

This group of stocks has paid reliable dividends for over 20 years. One of my favorites in this space has paid over 146 consecutive dividends and raised its payout for 37 straight years. (Full Story Below)

Also in Today's Issue...

10 Simple Ways to Earn Extra Retirement Income This Year
For an instant boost to your income, look no further. One of our picks is yielding 14.5% right now, and it's handed investors 72% total returns since 2008. Learn more about this stock - and 9 others - in this special report.
Pay Your Mortgage With Options?
Or, you could pay your car payment, take a trip to visit the grandkids or go on a long overdue vacation. It's possible thanks to the income generating power of options. And best of all, options are actually much safer than you've been led to believe - if you know what less than 1 in 4 investors know about using options to generate income. For a proven way to increase income in retirement, click here.

This 9%-Yielder Has Paid 146 Consecutive Dividends

They're the creme de la creme of the income universe.

Each one has increased its dividend every year for at least two decades... some sport track records with over 50 years of consecutive dividend increases.

All told, these stocks are some of the most reliable dividend payers on the planet.

I'm talking about the S&P 500 "Dividend Aristocrats" and their kissing cousins, the S&P "High Yield Dividend Aristocrats."

In order to become a member of these elite groups, a company must not only pay a regular dividend, it must also enjoy a stellar track record of growing that dividend every year for at least 20 years.

With such stringent membership criteria, only about 70 U.S. companies make the grade.

As you'd expect, a wide variety of industries are represented. You'll find an overweighting of consumer staples such as Procter and Gamble (NYSE: PG) and Kimberley Clark (NYSE: KMB), and a healthy chunk of electrical utilities, such as Consolidated Edison (NYSE: ED) and Northwest Natural Gas (NYSE: NWN).

But there's one group that makes the list that you would probably never expect: insurance.

All together, six of some 70 aristocrats sell insurance. Even more interesting, five of these six companies are property and casualty insurers. The exception is Aflac, which is mainly a life insurer.

What is it about property and casualty insurers that allow them to keep increasing their dividends in good times and bad for at least a quarter of a century?

The answer surprised me. Here's what I found out...

Today, insurance is usually life or non-life, also known as property and casualty.

Property insurance covers loss or damage to physical property, such as houses and cars. Casualty insurance covers the legal cost if the insured person were to cause someone else physical injury or damage another's property. Liability insurance is a common example.

You might expect property and casualty insurers such as Dividend Aristocrat -- RLI (NYSE: RLI) -- to be cash-flow machines... churning out streams of highly predictable earnings quarter after quarter.

Nothing is further from the truth.

Their earnings streams are notoriously volatile. Major unpredictable risks, such as natural disasters, have a huge impact on earnings.

So why do I like property and casualty companies then? As in all industries, some companies far outperform others. RLI is one of them -- as measured by the combined ratio, the key industry metric of underwriting profit.

The combined ratio combines two metrics. It measures underwriting expenses as well as the amount paid out in claims, both as a percentage of net premiums earned.

A combined ratio of 100 means the company is breaking even on its underwriting activities; the lower the ratio, the higher the company's underwriting profit.

In 2011, RLI's combine ratio was an outstanding 78.4... Well below the industry average of 107. During the third quarter 2012, RLI's combined ratio was 87.7 -- ticking up because of damage caused by Hurricane Sandy.

RLI has seen sixteen straight years of underwriting profitability, with an average combined ratio of 87 over the period.

And while property and casualty companies may break even or lose money on their underwriting activities... that is only part of their financial story.

These companies accumulate millions and even billions of dollars of investment capital, which provides investment income that makes a vital contribution to their per-share earnings.

For example, RLI earns investment income and realizes gains from a $1.9 billion portfolio, comprised 74% of high-quality debt with an average "AA" credit rating, and 26% in equity.

Given that the investment portfolio comprises the lion's share of earnings, management's decision on whether or not to realize capital gains or losses by selling investments can cause tremendous earnings volatility from year to year.

How can volatile earnings grow dividends?

First, insurance companies keep their payout ratio relatively low, so it can inch up the dividend regardless of earnings. RLI had a payout ratio of 25.0% of in 2009, 19.2% in 2010, and 19.5% in 2011.

Meanwhile, insurance companies keep building shareholders' equity, which they can dip into on a temporary basis to supplement the dividend if there were a short-term earnings shortfall.

That's one reason RLI has been able to pay a dividend for 146 consecutive quarters and raise its ordinary dividends for 38 consecutive years.

For the past three years, the insurer has also returned excess earnings to shareowners in the form of one-time special dividends. In 2010, the special December payout was $7 a share and in 2011 and 2012, it was $5 a share.

Over the past four quarters, the company paid out $1.28 in ordinary dividends. Factoring in last year's special dividend, shares of RLI provide a remarkable yield of 9.2% at today's price -- an outstanding yield for a member of the "Dividend Aristocrats."

That also makes it the highest yielding "Dividend Aristocrat."

Of course, as with every investment, there are risks to be considered. If management decides to break with its three-year policy of paying out a special dividend from excess capital, the stock would no longer be suitable as a high-yield income play.

With that said, many insurance companies have a surprisingly good track records when it comes to dividend payouts. If you're looking for a high-yield stock with a reliable dividend, then an insurer like RLI may be suitable for you.

[Note: Have you had a chance to look at my research team's recently released report, "The 10 Best Retirement Savings Stocks." These 10 stocks offer a safe income stream and yield up to 15%. Go here to learn more.]

Good Investing!

Carla Pasternak's Dividend Opportunities

P.S. -- Don't miss a single issue! Add our address,, to your Address Book or Safe List. For instructions, go here.

Disclosure:  StreetAuthority does not own shares of securities mentioned in this article. In accordance with company policies, StreetAuthority always provides readers with at least 48 hours advance notice before buying or selling any securities in any "real money" model portfolio. Members of our staff are restricted from buying or selling any securities for two weeks after being featured in our advisories or on our website, as monitored by our compliance officer.

Income Notes

Shares of Intel fell $1.52 on Friday after the company released 4th quarter earnings. The company has a 4.2% dividend yield at the end of the day. 

--  Research Staff

10 Best Retirement Income Stocks Now

Some pay quarterly. Others pay monthly. All offer you a safer, more stable, and reliable source of high income even if the market goes down.

Get the full details and stock symbols here.

Breaking News

A 5% Yield From one of the World's Most Recognizable Brands

Right now, the S&P 500 is too expensive. And though you may think it's risky, by investing in the right companies overseas you can lock in higher dividend payments and solid capital gains.

Read On...

Five Of My Favorite "Dividend Champions"

By investing in these "Dividend Champions" at the right time, you can get quick gains and lock in a higher yield than other investors.

Read On...

How To Generate Instant Income In The "Dividend Decade"

With some predicting that all of the market's gains in the next 10 years will come from dividends, investors absolutely must know about this little-known way for investors to generate income from the best companies in the world...

Read On...



Home | Issue Archives | About Us | Meet the Staff | Subscribe
Premium Content
Research Reports | Media Coverage | Testimonials | Advertise

Dividend Opportunities is a publication by StreetAuthority, LLC, 4601 Spicewood Springs Rd, Building 3, Suite 100, Austin TX 78759 or You are receiving this newsletter because you visited us at and registered to receive our complimentary investing newsletter -- Dividend Opportunities. If you feel you have received this issue in error, please follow the instructions below to unsubscribe or contact us by visiting our web site.

DISCLAIMER: StreetAuthority, LLC is a publisher of financial news and opinions and NOT a securities broker/dealer or an investment advisor. You are responsible for your own investment decisions. All information contained in our newsletters or on our web site(s) should be independently verified with the companies mentioned, and readers should always conduct their own research and due diligence and consider obtaining professional advice before making any investment decision. As a condition to accessing StreetAuthority materials and web sites, you agree to our Terms and Conditions of Use, available here, including without limitation all disclaimers of warranties and limitations on liability contained therein. Owners, employees and writers may hold positions in the securities that are discussed in our newsletters or on our web site.

The information contained herein does not constitute a representation by the publisher or a solicitation for the purchase or sale of securities. Our opinions and analyses are based on sources believed to be reliable and are written in good faith, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. All information contained in this report should be independently verified with the companies mentioned. The editor and publisher are not responsible for errors or omissions.
StreetAuthority receives no compensation of any kind from any companies that may be mentioned in our newsletters or on our web site. Any opinions expressed are subject to change without notice. Owners, employees and writers may hold positions in the securities discussed in this report or on our web site.

To Unsubscribe
You may choose to stop receiving our Dividend Opportunities newsletter at any time.
Unsubscribe here.

Subscribe for FREE

Subscribe to Dividend Opportunities today and you'll receive a FREE newsletter three times a week, plus a FREE in-depth research report that identifies some of today's highest-yielding securities.

There's absolutely nothing to purchase, we'll keep your email address private, and you can cancel at any time. You truly have nothing to lose, so take advantage of this no-hassle, risk-free offer today!

Click here to subscribe now.