Monday, February 18, 2013

Cincinnati Financial Corp. CINF 2013 Dividend Machine

Four Dividend Machine Criteria
Three % Dividend Yield
EPS greater than Dividend
Dividend Increases every year since at least 2007
D/E ratio 1 or less or industry standard.

My hunt for dividend income leads me to the dividend news column in the Wall Street Journal. (This column is published Tuesday through Saturday.)   Lately each time I review its list of companies that have increased dividends, I am amazed at how many are on that list.  Yet, few of those companies meet the demanding criteria of “Dividend Machine” status.

I am adding Cincinnati Financial Corporation, symbol CINF, to my 2013 dividend machine list because it has an excellent history of dividend increases.   Read on to see why this company qualifies as a dividend machine and why I will add to my position.

Dividend Increases

S&P reports that dividend increases in the fourth quarter of 2012 numbered 1,262 companies.  In 2011 only 649 companies increased their dividend.   One can speculate why so many more companies increased in 2012 but it does not matter why.   What is most important to income investors, and especially to investors who use dividends for part or all of their income, is that we have more choices from which to pick.

Regular dividend increases are vital for income investors.   Just look back 10 or 20 years and measure the cost of a car, milk, your utilities, or house maintenance; they are all up and up a lot.  Few older dividend investors have a mortgage so we do not benefit from low interest rates.   Our expenses go up every year; therefore, our dividend income has to go up every year.

CINF has a proud history of dividend increases.   In fact, CINF sports a fifty three year history of annual dividend increases.

Cincinnati Financial Corporation Dividend Machine Fundamentals

On Friday, February 15, 2013, CINF closed at $44.84.  If you own it by March 20, 2013 (ex-dividend date is March 18, 2013) you will be paid a quarterly dividend of $.4075 per share on April 15, 2013 for a yield of 3.65%.   So we know CINF meets our minimal dividend yield criteria.

CINF’s last four quarters of earnings were $2.23.   Dividends paid out during that same four quarters were $1.615 per share.  In 2013, dividends should equal $1.65 per share.  CINF makes more money than it pays out.

Cincinnati Financial Corp.
Price when profiled
Last 4 Qtrs Earnings
Last 4 Qtrs Dividends
Current Qtr Dividend
Annualized Div Yield
No. Years Div Increase
53 years
Debt/Equity ratio
As noted above, CINF has increased the dividend every year for fifty three years.  Finally CINF, which is a property and casualty insurer, has a very solid balance sheet.  Their D/E (debt to equity) ratio, which is simply a measure of how much debt they have, is only .17 which is well below our maximum debt ratio of 1.

Add to My Position

Consider CINF for the dividend income portion of your portfolio.    I have owned this company since August of 2012 when I found it on my dividend machine hunt.  I want to put some money to work, but all dividend producing companies are getting expensive.  Therefore, I need to make sure that I have a good chance of increasing the income my investment delivers just in case I buy too high.