Chloe Lutts Jensen, editor of Cabot Dividend Investor, focuses exclusively on high quality, dividend-paying stocks. Here, she looks at a new buy recommendation, a niche player in insurance market, focused on teachers.

Volatility has been the defining trait of 2015 thus far, so this month I’m adding a conservative insurance stock to the Safe Income tier of our portfolio.

Horace Mann (HMN) is an insurance company that serves school employees and their families. The company sells auto, home, and life insurance and annuities to teachers, administrators, and other school employees.

About 80% of customers work in K-12 public schools. The company has its own sales force of agents who maintain close relationships with the public schools in their districts.

With moderate upside and risk and a reliable 2.9% dividend yield, Horace Mann Educators Corp. is a stock that will reward you over time while also letting you sleep at night.

Horace Mann’s current payout ratio of 35% is slightly higher than usual (based on past years) but still within the range that I consider safe for an insurance company.

In recent quarters, earnings growth has been driven by strong sales of annuities and life insurance, as well as new products like indexed annuities and other post-retirement products.

One challenge facing Horace Mann is higher than expected payments for non-catastrophe weather damage. It is adjusting insurance rates to more accurately reflect recent weather trends; it is also exiting the property market in coastal Florida by transferring policies to other companies.

The low interest rate environment of the past few years has limited the profitability of Horace Mann’s investing activities.

Rising rates—whether they come late this year or in 2016—should create more safe investment opportunities and increase the profitability of the company’s investing operations.

Its debt to equity ratio is at a multi-year low of 0.16x, among the lowest in the industry. Overall, Horace Mann is a very conservative insurer, a very reliable dividend payer, and a fairly low-risk stock.

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