New Buy: The Travelers Companies Inc. (TRV)

After compiling my most recent watchlist I decided to pull the trigger on the  first insurer in my portfolio. With my earlier purchase of Analog Devices Inc. this will be my second and final buy for the month.

On May 30 I bought 15 shares of The Travelers Companies (TRV) for a total of $1,850. 

In this post I explain the reasons why I made this addition to my portfolio and what this means for my forward dividend income. 

The Travelers Companies, Inc., through its subsidiaries, provides a range of commercial and personal property, and casualty insurance products and services to businesses, government units, associations, and individuals in the United states and internationally. The company operates through three segments: Business and International Insurance, Bond & Specialty Insurance, and Personal Insurance.

The main predecessor companies of the company are The St. Paul Companies, Inc. and Travelers Property Casualty Corporation – both of these were founded back in the 19th century.

If the red umbrella logo of The Travelers Companies reminds you of the Citigroup logo you are on to something: the two companies merged in 1998. This merger didn’t work out too well, the companies separated again and The Travelers Companies grabbed their red umbrella back.

However, I didn’t buy Travelers for its interesting corporate history but rather for its attractive dividend features.

TRV is a dividend contender with an impressive 13 year streak of dividend increases. The current yield is  2.33% – lower than the average 3.5% yield I strive for in building my portfolio.

The payout ratio is at 28%, leaving ample room for continued dividend growth. The 5 year dividend growth is a decent 11.92%.

Comparing Travelers’ Earnings per Share (EPS) in the last quarter versus the same quarter in the prior year shows a -5.65% decrease. Current year EPS versus last year equals a -8.67% decrease.

While EPS decreases should give every investor some pause, the company explains itself by pointing to significant catastrophe losses (hurricanes etc).

Hard to predict when those occur again and in which frequency (the very reason the insurance industry exists) – but I think the strong dividend features make up for a bad quarter.

The Price/Earnings (P/E) ratio is 12.2, slightly above the 5 year average of 10.5, but well below the Insurance industry’s 5 year average of 20.8.

In their May 13 report CFRA marks The Travelers Companies Inc. as a 4 star buy with a 12 month target price of $132 – about 8% above my buying price.

Given the yearly dividend of $2.88 per share this purchase increased my forward annual dividend income by $43.20.

What do you think about Travelers? Are you buying other dividend growth stocks? Leave a comment/reply to share your thoughts!

My Buy Watchlist for June

Even though valuations continue to grind higher, I am always looking for new companies to add to my portfolio. There are currently two candidates on my June watchlist: VF Corp (VFC) and The Travelers Companies (TRV).

I wrote about VFC earlier when I put the company on my February watchlist. In that post I listed all the reasons why I like the stock – and wanted to increase my existing position at the time.

With the stock close to $50 again I am tempted to add more of this dividend champion. VFC provides a very decent yield of 3.8% at the moment, while boasting 44 (!) years of dividend increases.

The second stock on my watchlist (TRV) would be a new position in my portfolio – and also my first insurance company.

The Travelers Companies, Inc., through its subsidiaries, provides a range of commercial and personal property, and casualty insurance products and services to businesses, government units, associations, and individuals in the United states and internationally. The company operates through three segments: Business and International Insurance, Bond & Specialty Insurance, and Personal Insurance.

The company is a dividend contender with 13 years of dividend increases. While the current yield is relatively modest – 2.37% – the five dividend growth rate is a nice 11.92%. 

Another reason why I am putting TRV in my crosshairs is low payout ratio of just 28%, leaving much room for future dividend growth.

In addition to these two companies that would further boost my forward dividend income I am also interested in buying a book: ‘Black Edge‘.

The book is marketed as ‘the story of the billionaire trader Steven A. Cohen, the rise and fall of his hedge fund, SAC Capital, and the largest insider trading investigation in history—for readers of The Big Short, Den of Thieves, and Dark Money’. 

While this has nothing to do with my strategy of DGI I am sure it makes for very interesting reading.

What do you think about these two companies? What is your watchlist for the month? Leave a comment/reply to share your thoughts!