Sunday, May 29, 2011

Dividend Machine for May 23, 2011 Revised to HGIC

Dear Income Investors:  Well, this is embarassing; last week I profiled a company BCE which I had already included in our dividend machines list. To correct this error I offer a revised pick.  Harleysville Group, symbol HGIC is my new dividend machine for May 23, 2011.

Dividend Machine Harleysville Group, symbol HGIC – Revised for May 23, 2011

                Income investors should own a few insurance companies.  Insurers are the trillion-pound gorilla in the room.  Everyone hates them but it is hard to live without insurance.  Property and Casualty insurer Harleysville Group, symbol HGIC, is a very nice dividend machine.  Not only has Harleysville increased your income every year by raising the dividend from $.76 per share in 2006 to $1.44 per share in 2011, in 2010, HGIC paid an extra dividend of $1.44 per share.  We income investors love these types of income producers.  HGIC is a true dividend machine.

                Earnings vary with adverse events. Income investors buy companies that share earnings with us as dividends.  This means earnings are important.  When property and casualty insurers pay out due to losses they have to cover, earnings can be compromised.  However, property and casualty insurers also tend to raise their rates during adverse times.  Eventually, earnings recover.  Any company that can increase our income every year along with increasing their earnings every year is a company we want to own.

                HGIC has earnings of $2.79 per share per year, which easily covers their dividend of $1.44.  At Friday May 20's closing price of $31.27, HGIC’s dividend yield is 4.60%.  With a D/E ratio of only .15 this is a solid company, In addition, A.M. Best rates this company an A. 

                You will receive the quarterly dividend of $.36 on June 30, 2011 provided you own HGIC by June 13, 2011.

Very Truly Yours,