W. R. Berkley: Insurance Firm Sets up for a Split

03/20/2019 5:00 am EST

Focus: FINANCIALS

Neil Macneale III

Editor, 2 for 1 Stock Split

Neil Macneale fcouses on stocks that have announced upcoming splits; here, the editor of 2-for-1 Stock Split Newsletter reviews an insurance play being added to his model portfolio.

The only split worthy of our attention so far this year is W. R. Berkley Corp. (WRB), announcing a 3 for 2 split on 2/21. WRB is a medium size company by market cap ($10 billion) but, in the insurance world, it’s pretty small potatoes, writing just 1% of the insurance in the USA per year.

William R. Berkley, 73 years old, founded the company in 1967 and, according to Forbes, still owns 20% of it. He turned over the CEO job to his son in 2015 but remains Chairman of the Board.

Berkley primarily writes various specialty lines of commercial insurance so it’s not likely the average home or auto buyer has ever heard of the company. However, this is a profitable, steadily growing business that definitely fits into the 2 for 1 portfolio.

Even though there were no other splits with which to compare it, I ran the numbers through the same screens I use every month just to get a better feel for this company relative to the rest of the portfolio.

WRB’s score was not overly impressive, but certainly respectable. Volatility is less than the market average and valuation numbers are a bit better than average for this industry and sector. I like the five-year average growth for earnings and return on equity, both coming in around a healthy 12%/year.

The dividend needs special scrutiny. All the financial sites I checked show WRB paying $0.60/share/year for a .72% dividend yield; OK, but not great.

However, over the last two and a half years, WRB has also paid out four different special dividends of $0.50 each. If this trend continues, we will have a much better yield of over 1.5%.

There is a special consideration regarding the timing of this recommendation. The record date used to determine who receives the next dividend was yesterday, 3/14/19, so you won’t get this latest quarterly payout.

However, you will still get the split shares you’re entitled to even if you buy after the record date but before their delivery on April 2nd.

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