For investors looking for steady income, a methodical filtering process can find companies that provide more than a high stated yield. The aim is to locate stocks with lasting payouts, backed by good business condition and earnings. One useful technique is to apply a multi-factor filter that emphasizes a high dividend score, a combined grade assessing yield, increase, record, and longevity, while also setting basic levels for financial condition and earnings. This process helps remove companies where a high yield could be misleading due to a falling share price, concentrating instead on businesses with the operational capacity to keep and raise their dividends.
CINCINNATI FINANCIAL CORP (NASDAQ:CINF), a property and casualty insurer based in Ohio, appears as a result from this type of filtering process. The company’s basic profile indicates it might be a noteworthy option for portfolios centered on dividends, especially when examined for dividend longevity and business strength.
Dividend Profile: A History of Dependability
The central attraction of CINF for income investors is its long-standing dividend practice. The company’s dividend measures show a mix of good income and a focus on increase.
- Yield and Increase: CINF provides a dividend yield of 2.31%, which is higher than the present S&P 500 average. More notably, the company has raised its dividend at a yearly rate of 7.50% over the last five years, showing a steady intent to give more capital back to shareholders.
- Payout Longevity: A vital test for any dividend stock is the payout ratio. CINF uses about 24.36% of its earnings for dividends, seen as a small and careful ratio. This gives a large buffer for the company to put money back into the business, meet costs, and continue the payout during times of reduced earnings.
- Established Record: The company has a dependable history, having paid and, critically, not reduced its dividend for at least ten straight years. This record of management is a main sign of the leadership’s focus on shareholder returns.
These elements together lead to the company’s good ChartMill Dividend Rating of 7 out of 10. For the filtering process, this rating confirms that CINF is not only a high-yield stock but one with good traits in size, increase, and longevity. You can see the complete details of this examination in the detailed fundamental report for CINF.
Supporting Basics: Earnings and Financial Condition
A lasting dividend needs to be backed by a profitable and financially stable business. The filtering rules needed acceptable scores in these areas to exclude companies that could be pressured to reduce their payout. CINF’s profile here is positive.
The company gets a ChartMill Profitability Rating of 6. Main advantages include good margins, with a Profit Margin of 17.57% and an Operating Margin of 22.12%, both placed well in the top group of its insurance industry competitors. Also, its Return on Invested Capital (ROIC) of 5.29% is solid. These measures show that CINF is effectively producing earnings from its activities, the same earnings that pay for the dividend.
From a balance sheet view, CINF gets a ChartMill Health Rating of 5. The rating is supported by very good solvency measures. The company has a very small Debt/Equity ratio of 0.05 and a notably strong Debt to Free Cash Flow ratio of 0.29, meaning it could pay off all its debt with less than four months of cash flow. This tiny use of debt financing gives important stability and lowers risk for dividend investors, as the company is not strained by interest costs.
Valuation and Increase Factors
While the main interest for a dividend investor is often the income, total valuation and increase outlook give useful background. CINF’s valuation is viewed as somewhat high compared to its industry, with a P/E ratio above many peers. However, it stays valued under the wider S&P 500 average. Increase is a varied picture; the company has achieved good past revenue and EPS increase, but analyst forecasts for the next years are for more limited, single-digit earnings increase.
For a dividend investor, this valuation and increase profile indicates that CINF is probably not a high-increase opportunity. Instead, it fits more with the profile of a stable, defensive income stock where the main return source is the dependable and rising dividend, supported by a profitable and carefully financed insurance business.
Finding Other Dividend Options
Cincinnati Financial Corp. shows the kind of company a methodical dividend filter can find: one with a good dividend rating supported by the earnings and financial condition needed to maintain it. Investors interested in examining other stocks that meet similar rules of high dividend quality with acceptable basic support can use the filter themselves.
Find more possible options by using the full Best Dividend Stocks filter.
Disclaimer: This article is for information only and is not financial advice, a suggestion to buy or sell any security, or a support of any investment plan. All investments carry risk, including the possible loss of the original amount invested. Readers should do their own study and talk with a qualified financial advisor before making any investment choices.
