Dividend Kings In Focus: RLI Corp.

Printed on March nineteenth, 2025 by Bob Ciura

The Dividend Kings are a selective group of shares which have elevated their dividends for not less than 50 years in a row.

We consider the Dividend Kings are among the many highest-quality dividend development shares to purchase and maintain for the long run.

With this in thoughts, we created a full checklist of all of the Dividend Kings.

You’ll be able to obtain the total checklist, together with essential monetary metrics akin to dividend yields and price-to-earnings ratios, by clicking the hyperlink under:

RLI Corp. (RLI) is the most recent member of the Dividend King checklist, having introduced its fiftieth consecutive annual dividend enhance on February thirteenth.

This text will focus on the corporate’s enterprise overview, development prospects, aggressive benefits, and anticipated returns.

Enterprise Overview

RLI Corp. is an insurance coverage firm that operates the next enterprise models: Casualty (healthcare & transportation insurance coverage), Property (fireplace, earthquake, distinction in circumstances, marine, and many others.) and Surety (contract surety protection, licenses, and bonds).

Supply: Investor Presentation

RLI Company reported its fourth quarter earnings outcomes on January 22. The corporate reported revenues of $440 million for the quarter, which was up 1% year-over-year. Internet earned premiums rose by 15% year-over-year.

Realized features have been greater than in the course of the earlier 12 months’s interval, which had a optimistic influence on the corporate’s reported revenues, however internet unrealized features have been decrease in comparison with the earlier 12 months’s quarter, offset a few of the income tailwinds.

Larger internet funding revenue, which was up 19% 12 months over 12 months, was a tailwind for RLI’s profitability in the course of the quarter.

RLI Company earned $0.41 per share on a non-GAAP, or adjusted, foundation in the course of the quarter, which is the place RLI backs out one-time objects that may distort the image in the case of the corporate’s underlying earnings energy.

RLI’s backside line was decrease than in the course of the earlier 12 months’s interval, however for your complete 12 months of 2024, earnings have been up. RLI Corp is forecasted to see its earnings-per-share develop properly this 12 months, to greater than $3.00.

Progress Prospects

RLI Corp. has not been capable of develop its income very persistently up to now, as income moved sideways for a lot of the final decade.

That is, largely, as a result of low rates of interest diminished the revenue RLI can generate with its insurance coverage float at instances.

Since 2020, nevertheless, RLI Corp. has grown its earnings-per-share very properly, with earnings-per-share rising by greater than 100% between 2020 and 2024.

Larger rates of interest permit RLI Corp. to deploy its insurance coverage float in a extra worthwhile method, thus a higher-rates setting is optimistic for the corporate, all else equal.

Supply: Investor Presentation

RLI has grown its premiums within the latest previous, and due to additional premium development, RLI ought to see its gross sales develop sooner or later.

We consider that 3% annual earnings-per-share development is a practical long-term estimate, factoring within the latest efficiency and the longer-term monitor file.

Aggressive Benefits & Recession Efficiency

Many monetary firms, together with some insurers, skilled important problem in the course of the Nice Recession.

RLI remained worthwhile, and its earnings-per-share really grew in the course of the 2008-to-2010-time body. We consider that RLI Company shall be comparatively steady throughout future recessions as nicely.

RLI Company has raised its common dividend very steadily through the years, which was potential on account of ongoing will increase within the firm’s payout ratio over a few years.

Extra not too long ago, the dividend payout ratio has come down once more, and the dividend appears to be like very sustainable for now.

In the course of the Nice Recession of 2008-2009, it steadily grew earnings-per-share every year in that point:

• 2008 earnings-per-share of $3.60
• 2009 earnings-per-share of $4.32 (20% enhance)
• 2010 earnings-per-share of $6.00 (39 enhance)

Valuation & Anticipated Complete Returns

Primarily based on anticipated 2025 earnings-per-share of $3.10, RLI inventory trades for a ahead P/E of 24.4. That is above our truthful worth estimate of 19, which means shares seem overvalued.

RLI Company’s worth to earnings a number of has been transferring in a really big selection up to now. Shares have been valued at a low double-digit worth to earnings a number of shortly after the Nice Recession, however the firm’s valuation a number of has exploded upwards since then.

RLI’s valuation stays elevated. We consider that shares are buying and selling above truthful worth and that a number of compression is probably going going ahead.

For instance, if the P/E a number of declines from 24.4 to 19 over the subsequent 5 years, it will scale back shareholder returns by -4.9% per 12 months over that timeframe.

Apart from modifications within the P/E a number of, RLI also needs to generate returns from earnings development and dividends. A projection of anticipated returns is under:

• 3% earnings-per-share development
• 0.8% dividend yield
• -4.9% a number of reversion

RLI has a daily quarterly dividend, and periodically pays particular dividends as nicely. For instance, the corporate paid shareholders a particular dividend of $4.00 per share in 2024, and a $2.00 particular dividend in 2023.

Nevertheless, since particular dividends are irregular, we exclude them from our evaluation and as a substitute give attention to the common quarterly payouts.

On this state of affairs, RLI inventory is projected to generate a destructive complete return of -1.1% per 12 months over the subsequent 5 years.

Closing Ideas

RLI Company is an insurance coverage firm which generated strong working outcomes lately, with written premiums and funding revenue rising at a pleasant tempo.

Earnings will doubtless proceed to develop in the course of the subsequent couple of years, however not at a very quick tempo.

RLI Company doesn’t have a really robust long-term monitor file, though outcomes throughout latest years have been robust, whereas the outlook for 2025 is compelling as nicely.

Nevertheless, we consider that shares are overvalued at present. Due to this, RLI Company earns a promote advice from Certain Dividend on the present valuation degree.

Further Studying

The next articles include shares with very lengthy dividend or company histories, ripe for choice for dividend development buyers: