Dividend Aristocrats In Focus: Chubb Ltd.

Up to date on March twentieth, 2024 by Bob Ciura

Solely corporations within the S&P 500 Index, with at the least 25 years of dividend progress, can declare the title of being a Dividend Aristocrat. This membership is so unique that there are solely 68 such corporations within the S&P 500 Index.

In consequence, Dividend Aristocrats are comparatively uncommon among the many broader S&P 500.

With this in thoughts, we created a listing of all 68 Dividend Aristocrats, together with essential monetary metrics like price-to-earnings ratios and dividend yields.

You possibly can obtain an Excel spreadsheet with the total listing of Dividend Aristocrats by clicking on the hyperlink beneath:

Disclaimer: Positive Dividend shouldn’t be affiliated with S&P International in any method. S&P International owns and maintains The Dividend Aristocrats Index. The data on this article and downloadable spreadsheet relies on Positive Dividend’s personal overview, abstract, and evaluation of the S&P 500 Dividend Aristocrats ETF (NOBL) and different sources, and is supposed to assist particular person buyers higher perceive this ETF and the index upon which it’s primarily based. Not one of the data on this article or spreadsheet is official information from S&P International. Seek the advice of S&P International for official data.

Chubb Ltd. (CB) has elevated its dividend for 31 consecutive years. Chubb yields 1.3% proper now, which isn’t a excessive dividend yield. In truth, it’s beneath the S&P 500 Index’s present dividend yield of 1.5%.

Whereas Chubb shouldn’t be a high-yield dividend inventory, it does present constant dividend will increase every year, backed by a powerful enterprise mannequin.

Enterprise Overview

Chubb relies in Zurich, Switzerland, and gives insurance coverage companies, together with property & casualty insurance coverage, accident & medical health insurance, life insurance coverage, and reinsurance.

The corporate operates in over 50 international locations and territories. It’s the world’s largest publicly traded P&C insurance coverage firm and the biggest industrial insurer within the U.S.

Chubb has a big and diversified product portfolio.

Supply: Investor Presentation

For its fiscal fourth quarter, Chubb Ltd reported internet written premiums of $11.6 billion, which was 13% greater than the web written premiums that Chubb generated through the earlier yr’s quarter. Web written premiums have been up 12.5% year-over-year within the firm’s International P&C enterprise unit, whereas different enterprise items reminiscent of Life noticed strong progress as properly.

Chubb was capable of generate internet funding revenue of $1.37 billion through the quarter, or $1.49 billion after changes, which was up by a pleasant 33% in comparison with the earlier yr’s interval. Chubb generated earnings-per-share of $8.30 through the fourth quarter, which was method above what the analyst neighborhood had forecasted.

Chubb’s sturdy profitability through the quarter will be defined by an excellent mixed ratio, regardless of some pure disasters that impacted Chubb’s disaster losses.

Progress Prospects

Chubb has created vital worth for shareholders by way of rising its e book worth per share, a key metric for insurance coverage corporations. Since 2009 the corporate’s e book worth has grown at a compound common progress price of ~7% per yr.

As an insurance coverage firm, Chubb has a big pool of amassed premium revenue that has not been paid out in claims to prospects. This is named float. Insurers make investments premiums as quickly as they’re collected to earn curiosity or different revenue.

Increased rates of interest generally is a constructive catalyst for Chubb’s funding revenue. Will increase in portfolio funding yield will generate extra pre-tax internet funding revenue per yr.

The corporate additionally buys again shares which can assist develop earnings. General, we estimate Chubb might develop earnings-per-share by 5% yearly over the subsequent 5 years.

Aggressive Benefits & Recession Efficiency

Chubb’s aggressive benefits are its main business place in addition to its monetary energy. First, Chubb is the world’s largest publicly traded property and casualty insurance coverage firm and the biggest industrial insurer in the US. It has a dominant place throughout its product classes, which helps it to retain prospects.

Additionally it is in a powerful monetary place. Chubb is rated A by Commonplace & Poor’s and Aa3 by Moody’s, the most important U.S. credit standing companies. Its wholesome stability sheet and excessive credit standing present the corporate with monetary energy that helps retain shoppers and make investments for progress.

The insurance coverage business will be cyclical. Because the financial strengths, individuals are likely to have extra discretionary capital that can be utilized so as to add to their insurance coverage insurance policies. If the financial system weakens, prospects might pull again on their spending. This occurred through the Nice Recession for Chubb.

2007 earnings-per-share of $8.07
2008 earnings-per-share of $7.72 (-4.3% lower)
2009 earnings-per-share of $8.17 (5.8% enhance)
2010 earnings-per-share of $7.79 (-4.7% lower)
2011 earnings-per-share of $6.96 (-10.7% lower)

Though Chubb didn’t see fairly as extreme revenue declines as many different monetary companies, earnings-per-share did expertise some variability. Nevertheless, Chubb remained extremely worthwhile through the Nice Recession, which allowed it to proceed elevating its dividend even by means of the steep financial downturn. Chubb additionally remained extremely worthwhile in 2021, even through the coronavirus pandemic.

Whereas earnings-per-share might fluctuate from yr to yr, the corporate’s e book worth has elevated extra persistently.

Valuation & Anticipated Returns

Utilizing Chubb’s most up-to-date share worth of ~$259, together with anticipated earnings-per-share of $21.70 per share anticipated for 2024. In consequence the inventory trades for a P/E of 11.9, which is above our truthful worth P/E of 9.5.

If shares have been to revert to this common worth by 2029, buyers would see complete returns lowered by about -4.4% per yr.

Taking the corporate’s anticipated EPS progress price of 5%, dividend yield of 1.3%, and valuation adjustments collectively results in complete anticipated returns of 1.9% per yr over the subsequent 5 years.

Thus, valuation headwinds might outweigh many of the returns to be generated from the corporate’s EPS progress and dividend.

Last Ideas

Whereas Chubb is a well-managed and diversified insurance coverage inventory with a protracted historical past of rising e book worth, we consider the inventory will generate low complete returns within the coming years.

That is because of the excessive valuation of the inventory when in comparison with its 10-year common, in addition to the low dividend yield on account of the rising share worth. The steadiness in a cyclical business is noteworthy, as is the distinctive dividend progress report, however the present valuation makes us lean towards a maintain advice.

Moreover, the next Positive Dividend databases include probably the most dependable dividend growers in our funding universe:

If you happen to’re searching for shares with distinctive dividend traits, take into account the next Positive Dividend databases: