Yahoo Finance 2 Dividend Aristocrats to Buy in the Finance Sector
Amid recent concerns surrounding the financial health of banks, investors may be looking for stocks in the broader financial sector that may be able to withstand the headwinds.
Here are two top-rated stocks from the Zacks Finance sector that investors may want to consider. These stocks are also Dividend Aristocrats, raising their dividends for at least 25 consecutive years.
Aflac (AFL)
Starting out is Aflac which sports a Zacks Rank #2 (Buy). Aflac is in the finance sector but as an insurance provider, it should be able to avoid much of the scrutiny and uncertainty that banks are facing.
Plus, Aflac’s Insurance-Accident and Health Industry is currently in the top 4% of over 250 Zacks Industries. To that point, earnings estimates revisions have continued to go up over the last 60 days. Fiscal 2023 earnings estimates have now risen 4% throughout the quarter and FY24 EPS estimates are up 3%.
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Aflac’s earnings are now forecasted to be up 5% this year and jump another 6% in FY24 at $5.96 per share. Sales are projected to dip -5% in FY23 but rebound and rise 1% in FY24 to $18.64 billion.
Dividend History: AFL has a 2.60% annual dividend yield at $1.68 a share. The annualized dividend growth over the last five years is 10.76%. With a 30% payout ratio, Aflac has now raised its dividend for 39 consecutive years.
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Shares of AFL are down -11% year to date, but this year’s drop may be a buying opportunity as Aflac stock is up a very stellar +148% over the last three years to easily top the S&P 500 and match the Insurance-Accident & Health Markets +147%.
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Making Aflac stock look more attractive at the moment is its price-to-earnings valuation. Shares of AFL trade at $63 per share and 11.5X forward earnings which is beneath the industry average of 12.6X and the S&P 500’s 18.4X. This is also below its decade high of 13.8X and not far above the median of 10.5X.
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Cincinnati Financial (CINF)
Another top-rated Zacks Finance sector stock that investors may want to consider is Cincinnati Financial. As a marketer of property and casualty insurance, Cincinnati Financial may also avoid much of the weakness associated with banks at the moment.
Cincinnati Financial also sports a Zacks Rank #2 (Buy) with its Insurance-Property and Casualty Industry in the top 30% of all Zacks Industries.
Earnings estimates have noticeably gone up throughout the quarter. Fiscal 2023 earnings estimates have jumped 13% and FY24 EPS estimates have climbed 19%.
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Cincinnati Financials earnings are now expected to leap 21% this year and jump another 15% in FY24 at $5.90 per share. On the top line, sales are forecasted to be up 7% in FY23 and rise another 8% in FY24 to $9.34 billion.
Dividend History: CINF has a 2.70% annual dividend yield at $3 a share. Cincinnati Financials dividend growth over the last five years is 6.41% with a 65% payout ratio. Even better, Cincinnati Financial has raised its dividend for 61 consecutive years classifying it as a Dividend King as well (50 consecutive years).
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CINF stock is up 5% YTD to slightly top the S&P 500’s +4% and the Insurance-Property & Casualty Markets -2%. Over the last three years, CINF’s +61% has slightly trailed the benchmark but roughly matched its Zacks Subindustry’s +66%.
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With that being said, Cincinnati Financial stock trades attractively relative to its past. At $107 per share, CINF trades at 21.6X forward earnings and above the industry average of 12.9X. However, CINF trades 31% below its decade-long high of 31.3X and at an 8% discount to the median of 23.5X with the rising earnings estimates offering further support to its P/E valuation.
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Bottom Line
The rising earnings estimate revisions are a great sign for these Dividend Aristocrats along with their reliable dividends. This is also reassuring to investors who may have doubts about finding opportunities in the broader financial sector. In this regard, Aflac and Cincinnati Financial look like viable options and there could certainly be more upside in their stocks.
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Aflac Incorporated (AFL) : Free Stock Analysis Report
Cincinnati Financial Corporation (CINF) : Free Stock Analysis Report
