This article originally appeared on The DIV-Net August 3, 2009.
Linked here is a detailed quantitative analysis of RLI Corp. (NYSE: ). Below are some highlights from the above linked analysis:
Company Description: RLI Corp, based in Peoria, IL, provides selected property, casualty and surety insurance.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
- Avg. High Yield Price
- 20-Year DCF Price
- Avg. P/E Price
- Graham Number
RLI is trading at a discount to only 1.) above. The stock is trading at a 23.2% premium to its calculated fair value of $40.26. RLI did not earn any Stars in this section.
Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:
- Free Cash Flow Payout
- Debt To Total Capital
- Key Metrics
- Dividend Growth Rate
- Years of Div. Growth
- Rolling 4-yr Div. > 15%
RLI earned three Stars in this section for 1.), 2.) and 3.) above. One Star was earned for a Free Cash Flow payout ratio was less than 60% and not having any negative Free Cash Flows over the last 10 years. The stock earned another Star as a result of its most recent Debt to Total Capital being less than 45%. RLI earned a Star for having an acceptable score in at least two of the four Key Metrics measured. Rolling 4-yr Div. > 15% means that dividends grew on average in excess of 15% for each consecutive 4 year period over the last 10 years (1999-2002, 2000-2003, 2001-2004, etc.) I consider this a key metric since dividends will double every 5 years if they grow by 15%. RLI has paid a cash dividend to shareholders every year since 1976 and has increased its dividend payments for 35 consecutive years.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA.
