Monday, February 2, 2015

Cincinnati Financial CINF Almost a Dividend Machine

Rules are to be followed and sometimes they put a crimp in my style.  This happens quite often when I find an attractive income stock that just barely misses being a Dividend Machine.    I am so tempted to change my rules for tracking stocks in mid-stream but that would make for messing with my data.   My Dividend Machine portfolio holdings meet all the criteria I set up at the beginning of the year  I try to keep the data clean.   That means I can analyze the results with confidence.  Every stock meets those criteria. 

With that in discipline in mind, when it comes to my own money, I can be bought.   This is the case with Cincinnati Financial, symbol CINF.   CINF just misses the Dividend Machine cut based on annual dividend increases.    Their most recent increase is over 4%; $.44 to $.46.    When you go back 5 years, CINF’s dividend increases have averaged only 3.37%.   Even rounding up does not help meet my 2015 minimal 5 year dividend increase average of 4%.

CINF – an almost Dividend Machine

Every Dividend Machine has to earn more money than it pays out in dividends.   Cincinnati Financial earned $2.92 over the past 4 quarters.   Dividends paid out during that time were $1.76.   With the new quarterly dividend increase, CINF’s dividend is annualized at $1.84 for a forward yield of 3.65% using the intraday price of $50.43

Debt to equity ratio is the measure I use to determine financial strength.   CINF has a D/E ratio of .14 as compared with an industry average of .24.    Therefore, Cincinnati Financial is almost a Dividend Machine but not quite using my 2015 Dividend Machine Criteria.

CINF – 10 year Dividend History

Let’s look more closely at this company’s history.    CINF is a property and casualty insurer based in Ohio.   They have a long history and their dividend history is important to evaluate.  Ten years ago CINF paid a quarterly dividend of $.305.   Current quarterly dividend is $.46 (CINF is ex dividend March 16, 2015 with dividend payable on April 15, 2015.)   That translates into an average dividend increase over those ten years of 5%.    I cannot change my 2015 Dividend Machine criteria in mid-stream, but I personally can cheat.   Take a look at the CINF’s Dividend Machine Fundamentals.

The Table below presents CINF’s Dividend Machine Fundamentals. 

CINF - Previous Dividend Machine

Cincinnati Financial was a dividend machine in both 2012 and 2013.  I am long CINF and will add to my position.  Consider Cincinnati Financial, symbol, CINF for the income producing portion of your portfolio.