Dividend Aristocrat Overview: Cincinnati Financial

About Cincinnati Financial

Cincinnati Financial has increased dividends since 1962. Photo courtesy matthunterross via flickr.com

Cincinnati Financial has increased dividends since 1962.
Photo courtesy matthunterross via flickr.com

Cincinnati Financial was formed in 1968 out of The Cincinnati Insurance Company, which was formed in 1950 by four independent insurance agents.  The Cincinnati Insurance Company is now a subsidiary of Cincinnati Financial and operates four insurance companies serving the life, disability and property casualty markets.  Cincinnati Financial has two other subsidiaries: CFC Investment Company, which offers leasing and financing services, CSU Producer Resources, Inc., which is a wholly owned excess and surplus lines insurance brokerage.

The company is a member of the S&P 500 index and trades under the ticker symbol CINF.

Cincinnati Financial’s Dividend and Stock Split History

Cincinnati Financial, along with its predecessor organization The Cincinnati Insurance Corporation, has raised dividends since 1962.  Cincinnati Financial met the Dividend Aristocrat criteria of 25 consecutive years of dividend growth in 1986.  Most recently, the company increased their quarterly dividend by 4.76%, from 42 to 44 cents per share.  Between 2009 and 2013, Cincinnati Financial increased their dividend to shareholders in the 3rd quarter of the calendar year.  In 2013, Cincinnati Financial increased their quarterly dividend by 3.07%, from 40.75 cents per share to 42 cents per share.

Cincinnati Financial’s history of dividend growth has been mixed.  From the late 1980s to the mid-2000s, the company usually saw annual dividend growth in the high single digit percentages to the low teens.  However, in the most recent 5 years (2008 – 2013), the company has not seen dividend growth above 3.1% per year and in most cases, significantly less than that.  For example, in 2011 the company announced a dividend increase of 0.25 cents, from 40 to 40.25 cents, which represented a dividend growth rate of 0.63%.  This low dividend growth rate means that Cincinnati Financial has a dividend growth rate below average as compared to other Dividend Aristocrats.  The company’s 5 and 10 year annualized dividend growth rate has been 1.19% and 5.17% respectively.  The company’s longer term record improves, with 20 and 25 year dividend growth rates of 7.73% and 8.92%.

Offsetting this mixed record, Cincinnati Financial has made repeated payouts of stock dividends over the past 4 decades.  The company has paid 5% stock dividends to investors 6 times since April 1984, most recently in April 2005.  In addition, from April 1975 to April 1984, the company paid stock dividends between 4% and 10% six other times.

Cincinnati Financial has also split its stock five times since July 1969: 3 for 1 splits in May 1998 and May 1992, a 2 for 1 split in April 1985, a 3 for 2 split in April 1972, and a 4 for 1 split in July 1969.  Investors have benefitted from both the stock dividends and the stock splits.  In 1984, a single share of Cincinnati Financial paid a total of $2.20.  Thirty years later – in 2014 – that share would have grown to 24.12 shares paying a total of $42.45 in dividends

Direct Purchase and Dividend Reinvestment Plans

Cincinnati Financial has both direct purchase and dividend reinvestment plans.  Information on both plans, including a prospectus and enrollment forms, are available at the Cincinnati Financial website.  The minimum amount for initial and additional investments is $25.  Note that in order to participate in the direct purchase plan investors must agree to reinvest at least 10% of dividends.

The only fee for purchasing stocks, either directly or through dividend reinvestment is the brokerage fee, which is approximately 8 cents per share.  When selling stocks through the plan, investors pay the brokerage fee mentioned above along with a $10 per sell order fee.

Helpful Links

Cincinnati Financial Investor Relations Website

Current quote and financial summary for Cincinnati Financial (finviz.com)

Information on the direct purchase and dividend reinvestment plans for Cincinnati Financial