In Good Hands with Allstate

04/23/2020 5:00 am EST

Focus: FINANCIALS

Michael Foster

Editor, BNK Invest

It’s a good time to start buying high quality dividend stocks again. We are focusing on bulletproof cash flows that will sustain rising payouts in this new world in which we live, explains Michael Foster, editor of Hidden Yields.

During tumultuous times like these, I encourage you to keep your gaze forwards, not backwards, regarding your portfolio.

Allstate (ALL), the huge insurer that’s a household name, hasn’t been this much of a bargain since 2014. It trades for just over 7-times free cash flow (FCF).

If you bought shares six years ago, the last time they were this cheap, you doubled your money. And this even includes its 2020 pullback!

Of course, there has been a big decline in driving. Less time behind the wheel means fewer accidents, and fewer claims to pay out. Net-net this may all work out to be a positive in profits for Allstate.

The firm tipped its hand by returning more than $600 million of its savings to its customers in the form of a “Shelter-in-Place-Payback” on premiums.

It’s a nice gesture but we know what is going on here—customers are asking for less money in claims. So, Allstate smartly returns some of this extra cash back to its customers to keep them happy.

Really, Allstate’s stock shouldn’t have budged much. This is the beauty of investing after a waterfall selloff, in which every stock on the exchange was equally crushed. Allstate’s shares are now quite cheap with respect to their dividend.

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