Cincinnati Financial (CINF +1.78%) is a well-known property and casualty insurance company that been around for 76 years; but to investors, it's known for its dividends.
There are few stocks trading on the U.S. markets that have better track records of delivering dividend income to investors. It is simply one of the absolute best dividend stocks you can find.
Last week, Cincinnati Financial did it again, raising its quarterly dividend by 8% to $0.94 per share. That marks the 66th straight year that Cincinnati Financial has increased its dividend.
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Only seven U.S. stocks have longer streaks than Cincinnati Financial, and it is one of only approximately 51 stocks that can call itself a Dividend King for increasing its dividend annually for at least 50 years in a row.
The announcement of the dividend increase comes just over a week ahead of its fourth-quarter earnings, which will be released Monday, Feb. 9, after the market closes. Should you buy Cincinnati Financial stock ahead of earnings?
Cincinnati Financial stock is a buy
If you are looking for a good dividend stock, Cincinnati Financial should certainly be on your list right now.
I think it's a good time to add some dividend stocks to a portfolio in general, as stock markets have been volatile and will likely remain so. Valuations for large caps are at their highest levels since the dot-com boom, and we are seeing a rotation into more value-oriented stocks.
NASDAQ: CINF
Key Data Points
Cincinnati Financial not only offers the stability of a Dividend King, it also has a solid yield of 2.29% and a decent 44% payout ratio. The value of a good dividend in a difficult market goes beyond income. If the dividend is reinvested back into the stock, you get a higher total return.
The stock's average annualized return over the past five years is 14.2%, and with dividends reinvested, it's 16.6%. So you get more than 2 percentage points of return every year by reinvesting the dividend.
Last year was a good one for Cincinnati Financial. In the third quarter, it grew revenue by 12% year over year, net income by 37%, and had its lowest combined ratio, 88.2%, since 2015. The combined ratio is a key insurance industry metric that measures earned premiums against losses and expenses. A combined ratio of 100% is breakeven, and the lower you go, the more profitable you are. For comparison, in Q3 2024, the combined ratio was 97.4%.
It could benefit from a rotation into value
The company did not provide any guidance for Q4 or 2026, but it will have a hard time matching the success of 2025. In 2026, experts say the property and casualty market will soften, with rates expected to decline due to increased competition and other factors.
But Cincinnati Financial is expected to beat earnings in Q4, and most analysts rate the stock as a buy. Earnings are expected to grow 16% in 2026. Analysts at Keefe, Bruyette & Woods recently increased their price target to $191 per share, from $180 per share. That would be up 13% from the current price.
Cincinnati Financial stock is a buy for its dividend alone, but it's also a good value trading at 12 times earnings and may see an added surge from the rotation into cheaper, more stable stocks.
