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 not less than 25 years of dividend development, 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.

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

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

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

Disclaimer: Certain Dividend will not be affiliated with S&P World in any means. S&P World owns and maintains The Dividend Aristocrats Index. The data on this article and downloadable spreadsheet is predicated on Certain Dividend’s personal assessment, abstract, and evaluation of the S&P 500 Dividend Aristocrats ETF (NOBL) and different sources, and is supposed to assist particular person traders higher perceive this ETF and the index upon which it’s based mostly. Not one of the info on this article or spreadsheet is official information from S&P World. Seek the advice of S&P World for official info.

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 actual fact, it’s beneath the S&P 500 Index’s present dividend yield of 1.5%.

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

Enterprise Overview

Chubb is predicated in Zurich, Switzerland, and offers 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 most important business 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 throughout the earlier yr’s quarter. Web written premiums had been up 12.5% year-over-year within the firm’s World P&C enterprise unit, whereas different enterprise models equivalent to Life noticed strong development as effectively.

Chubb was capable of generate internet funding revenue of $1.37 billion throughout 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 throughout the fourth quarter, which was means above what the analyst neighborhood had forecasted.

Chubb’s sturdy profitability throughout the quarter might be defined by a very good mixed ratio, regardless of some pure disasters that impacted Chubb’s disaster losses.

Development Prospects

Chubb has created vital worth for shareholders when it comes to 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 development charge of ~7% per yr.

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

Greater 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. Total, 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 trade place in addition to its monetary power. First, Chubb is the world’s largest publicly traded property and casualty insurance coverage firm and the most important business insurer in the US. It has a dominant place throughout its product classes, which helps it to retain prospects.

It’s also in a powerful monetary place. Chubb is rated A by Customary & Poor’s and Aa3 by Moody’s, the main U.S. credit standing businesses. Its wholesome steadiness sheet and excessive credit standing present the corporate with monetary power that helps retain purchasers and make investments for development.

The insurance coverage trade might be cyclical. Because the financial strengths, folks 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 could pull again on their spending. This occurred throughout 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% improve)
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. Nonetheless, Chubb remained extremely worthwhile throughout the Nice Recession, which allowed it to proceed elevating its dividend even by the steep financial downturn. Chubb additionally remained extremely worthwhile in 2021, even throughout the coronavirus pandemic.

Whereas earnings-per-share could 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 value of ~$259, together with anticipated earnings-per-share of $21.70 per share anticipated for 2024. Consequently the inventory trades for a P/E of 11.9, which is above our truthful worth P/E of 9.5.

If shares had been to revert to this common worth by 2029, traders would see whole returns lowered by about -4.4% per yr.

Taking the corporate’s anticipated EPS development charge of 5%, dividend yield of 1.3%, and valuation adjustments collectively results in whole 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 development and dividend.

Remaining Ideas

Whereas Chubb is a well-managed and diversified insurance coverage inventory with an extended historical past of rising e-book worth, we consider the inventory will generate low whole 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 value. The steadiness in a cyclical trade is noteworthy, as is the distinctive dividend development document, however the present valuation makes us lean towards a maintain suggestion.

Moreover, the next Certain Dividend databases comprise essentially the most dependable dividend growers in our funding universe:

Should you’re in search of shares with distinctive dividend traits, take into account the next Certain Dividend databases: