If you want to add some dividend income to your portfolio, insurance is the sector to look at right now. There are some great insurers; that pay good dividends, at low prices right now.
Insurance companies have always been great value investments because they’re not sexy but they make a lot of money. These companies are great picks for a retirement portfolio because they offer a lot of stability and nice dividends. Here’s one of my favorite insurance companies that is cheap and pays a nice dividend.
Old Republic International Corporation (NYSE: ORI)
I like Old Republic because it pays a nice dividend yield (3.8% as of August 5, 2016) yet it was trading at really low price ($19.58 on August 5, 2016). The value investor in me likes the float and the growing revenues. There’s also some growth potential here with a return on equity of 10.91% on June 30, 2016 according to ycharts.
Most importantly Chicago-based Old Republic is not heavily exposed to health or auto insurance; two areas of the business I think are inherently unstable. Instead it operates in more obscure and boring fields including General Insurance, Mortgage Guaranty, Title Insurance and Life and Accident coverage.
The company’s major areas of business include all-industry risk management and writing policies for industries like trucking. It also writes some policies for midsized businesses and issues some home warranty policies. Old Republic conducts a small life and accident insurance business in the US and in Canada through the Reliable Life Insurance Company.
It specializes in travel insurance and life and accident insurance for truckers. That line is hardly glamorous but a growing segment of insurance.
This provides a diversified set of products; that are not vulnerable to larger political and economic conditions in the way that health and auto policies are. A large portion of Old Republic’s policies are issued to banks, governments and corporations. That’s a wise move in a country plagued by middle class income stagnation. It’s not sexy but it is safe.
Old Republic has a Lot of Float
Some other highlights at Old Republic include:
- Revenues of $5.882 billion on June 30, 2016. Those revenues have been growing in June, 2015, Old Republic reported revenues of $5.506 billion.
- A lot of float; including cash and short-term investments of $9.684 billion.
- That cash is growing in March 2016 Old Republic reported having $787.4 million in the bank.
- Assets of $17.99 billion.
- $623.3 million in cash from operations.
- A net income of $440.5 million.
- A free cash flow of $125.90 million.
- A profit margin of 7%.
This makes Old Republic a growing company that has a lot of float. It’s also out of favor with Mr. Market right now, there was an enterprise value of -$3.568 billion on August 5, 2016. That’s the kind of number that scares investors away from a money making company creating a bargain.
Still if you are looking for a low cost insurance company to add to your portfolio, Old Republic is an intriguing choice. It’s cheap, it has a lot of float and it pays a great dividend.