Wednesday September 12, 2012
by Mark Skousen, Hedge Fund Trader Alert
Even during market declines, dividend-paying stocks hold up better than non-dividend-paying stocks, often fighting the broad trend and rising in value.
The reason is obvious. These tend to be mature, profitable companies with stable outlooks, plenty of cash and long-term staying power. One such stock is our latest recommendation, Old Republic International (ORI).
I mention this, in part, because Old Republic is currently paying a whopping 8.2% dividend. But there are other reasons to own the stock, too.
Based in Chicago, Old Republic ranks among the nation’s 50 largest publicly held insurers. The company is primarily a commercial lines underwriter, serving many of America’s leading industrial and financial services companies.
Roughly 87% of its business is produced through independent agents and brokers, while the remaining 13% is generated through direct production.
This is a diversified insurance company. Its Great West division specializes in the trucking industry, insuring both vehicles and cargo. Old Republic Construction insures trade contractors and large construction projects.
Old Republic Insurance Company serves as a regional standard coverage insurer for the metals, stone, wood, plastics and healthcare industries. And Old Republic Insured Credit Services, Inc. protects lenders from defaults on consumer borrowings.
Business has been a bit lackluster of late. Although revenue surged 12% in the June quarter, Old Republic is likely to lose 25 cents a share this year.
However, the outlook is highly favorable. I estimate ORI will earn 75 cents a share next year. And that makes the stock cheap at less than 12 times prospective earnings. Plus, the dividend is secure.
Note, too, that insiders own 22% of the outstanding shares here. And they like the stock at current levels. In the last couple months, for instance, Chairman and CEO Aldo Zucaro has invested roughly $300,000 and now owns more than $10 million-worth of the stock.
Learn more about this financial newsletter at Mark Skousen's Hedge Fund Trader Alert.