{"id":65953,"date":"2023-09-27T07:41:43","date_gmt":"2023-09-27T11:41:43","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/2-magnificent-dividends-to-buy-and-hold-forever\/"},"modified":"2023-09-27T07:41:49","modified_gmt":"2023-09-27T11:41:49","slug":"2-magnificent-dividends-to-buy-and-hold-forever","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=65953","title":{"rendered":"2 Magnificent Dividends To Buy And Hold Forever"},"content":{"rendered":"
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Co-authored with “Hidden Opportunities”<\/em><\/p>\n

Have you ever reflected on those handful of expenditures that stand out as the absolute best investments you’ve made in your lifetime? It could be a book that gave you a whole new outlook, a trip that left an indelible mark on your soul, or a course or conference that ignited new passions.<\/span><\/p>\n

These tangible, intellectual, experiential, or even digital purchases enrich our present and often map the course for our future. They can even be stepping stones that lead us to the next great chapter of our lives.<\/p>\n

Such investments also come as tradable securities on the stock exchange. In every annual shareholder letter, Warren Buffett talks about the crown jewels of Berkshire Hathaway’s portfolio, his prized long-term investments in companies like Coca-Cola (KO), American Express (AXP), GEICO, etc. that keep generating billions in dividend payments every year.<\/span><\/p>\n

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“The cash dividend we received from Coke in 1994 was $75 million. By 2022, the dividend had increased to $704 million. Growth occurred every year, just as certain as birthdays. All Charlie and I were required to do was cash Coke’s quarterly dividend checks.” – Warren Buffett<\/em><\/p>\n<\/blockquote>\n

Ideally, we would like to hold our investments forever, and it would help if they paid us handsomely to do that. Today, we will discuss two cash-producing picks that make excellent additions to your long-term portfolio due to the predictability and safety of their yields.<\/p>\n

Let’s dive in.<\/p>\n

Pick #1: AFG Baby Bonds – Up To 6.5% Yields<\/h2>\n

The history of American Finance Group, Inc.<\/strong> (AFG) goes back to its humble beginnings in 1872 as the Great American Insurance Company. Today, AFG<\/strong> operates over 120 locations worldwide, employs 7,500 employees, and is a leader in specialty property and casualty insurance (P&C). Source<\/em><\/p>\n

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Investor Presentation<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

AFG’s underwriting standards and diligence are clearly seen from the fact that their overall “combined ratio” was under 94% for ten consecutive years. The combined ratio is the sum of incurred losses and expenses from policyholder claims divided by the earned premiums from the policies. Hence, a metric over 100% means an insurance firm is paying out more in claims than collecting through premiums. For FY 2023, AFG has guided the specialty P&C overall combined ratio between 89-91%, indicative of solid underwriting profitability. AFG maintains an excellent balance sheet, rated A+\/A1 by leading credit agencies.<\/p>\n

AFG’s board recently approved another increase in the regular annual dividend to $2.84 from $2.52\/share, a 12.7% YoY increase. AFG has no debt maturities until 2030, and the company has no borrowings under its $450 million credit line. The company ended Q2 with $551 million in cash and short-term fixed maturities, providing significant liquidity to AFG to take advantage of market disruption events.<\/p>\n

Dividends are not the only form of capital return pursued by AFG. The company has been actively repurchasing shares, with ~67 million in share purchases in 1H 2023. In addition, the company also purchased $4 million of its Senior Notes during Q2. AFG can purchase another 7 million shares remaining in its current repurchase plan. The family of Carl Lindner, Jr., company executives, and the institutional retirement plan for staff owns 24% of the shares indicating strong insider alignment towards shareholder interests.<\/p>\n

AFG has four publicly traded subordinated notes – baby bonds, trading at attractive discounts amidst the Fed’s hawkish monetary policy. Given AFG’s financial strength, operational excellence, and shareholder-oriented capital allocation priorities, the baby bonds present CD-beating “Sleep Well At Night” securities. All four subordinated notes carry investment grade “Baa2” ratings and come right below the company’s senior notes in the capital stack.<\/p>\n