The Chubb Corporation (CB) provides property and casualty insurance to businesses and individuals. Chubb has increased dividends for 45 years in a row. The company announced a 5.70% dividend increase in February 2010, plus a 14 million share repurchase initiative.
- Over the past decade, this dividend stock has delivered an average total return of 5.90% annually.
- Annual dividends have increased by an average of 8.70 % annually since 2000.
- A 9 % annual growth in dividends translates into the dividend payment doubling almost every eight years.
- Looking at historical data, going back to 1984, Chubb has actually managed to double its dividend payment every nine years on average.
- The dividend payout ratio has been on the decline and is lower than our typical 50% threshold. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
- Chubb is trading at 9.20 times earnings, yields 3.10%
- In comparison, rival Travelers Cos (TRV) trades at a P/E multiple of 8 and yields 2.90%, while Cincinnati Financial (CINF) trades at a P/E multiple of 9 and yields 5.90%.
- Berkshire Hathaway (BRK.B) is also a competitor, although it trades at a P/E of 22, and does not pay a dividend.
- The company allocates significant cash flow on stock buybacks, which could prove beneficial in the long run since it could provide above average dividend growth over time for the same effort.
- We like the company and its business model. Chubb (CB) is a way for investors to fill in the need for exposure to the financial sector, after companies like Citigroup (C) and Bank of America (BAC) cut their distributions.
- We believe that the company is attractively valued at this time and we would add to our position if a significant pullback were to occur.
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