American Financial Group Inc. (AFG) is an insurance holding company that is engaged in property and casualty insurance, focusing on specialized commercial products for businesses. AFG has a couple of elements that could be considered competitive advantages, notes Ben Reynolds, editor of Sure Dividend.
On Feb. 3, AFG released its financial results for the fourth quarter. The company’s total revenue decreased by 4% over the year-ago period to $2.06 billion. Slightly lower net earned premiums and net investment income contributed to this modest top-line decline during the quarter.
But AFG’s core net operating earnings per share jumped 17% year-over-year to $3.65. This topped the analyst consensus by $0.34. On the same day, AFG also declared a $1.50 special dividend per share. This was paid on Feb. 25.
As for its competitiveness, the company has been in business for more than a century and a half. This reputation alone is enough to attract many new customers. AFG’s specialized insurance product offerings also draw in new customers and allow the company to keep them. The necessity of the company’s products has allowed it to report overall renewal rate increases for 38 consecutive quarters.
AFG is also a financially healthy business. The company enjoys a BBB+ credit rating from S&P with a stable outlook. AFG’s dividend is well-covered, too, with the payout ratio set to be in the low-30% range for 2026. We think this gives it room to grow the dividend at a faster rate than core net operating EPS growth for the foreseeable future.
AFG stock trades for a P/E of around 11.7, compared with our fair value estimate of 12.5. Multiple expansion could boost shareholder returns by 1.4% per year. Combined with expected EPS growth of 9% and the 2.7% dividend yield, total returns could reach 12.8% per year over the next five years.
