Updated 3/5/25
AMERISAFE, Inc. (NASDAQ: AMSF) operates in the specialized world of workers’ compensation insurance, catering to high-risk industries like construction, trucking, and manufacturing. It’s not the kind of stock that gets a lot of attention, but for income investors, it has been a steady performer over the years.
This is a company known for disciplined underwriting, conservative financial management, and a long history of returning cash to shareholders. That said, recent earnings and revenue trends raise a few questions about whether its dividend growth can continue at the same pace. Let’s take a closer look at what makes AMSF stand out for dividend investors and what risks might be on the horizon.
Key Dividend Metrics
📢 Dividend Yield – 3.07% (Above its 5-year average, which could indicate value)
💰 Annual Dividend – $1.56 per share (Based on forward expectations)
📈 Dividend Growth – Around 6% annualized over the past five years
🔒 Payout Ratio – 51.21% (Manageable but creeping higher)
📅 Next Dividend Payment – March 21, 2025
🚨 Ex-Dividend Date – March 7, 2025 (Investors must own shares before this date to receive the next payout)
Dividend Overview
AMSF offers a solid 3.07% dividend yield, which is a step above its historical average of 2.32%. That’s often a signal that the stock could be undervalued from an income investor’s perspective.
Unlike companies that push dividends higher at the expense of sustainability, AMSF takes a measured approach. The current payout ratio of just over 51% is reasonable but starting to inch up, meaning future dividend increases could slow if earnings don’t recover.
One unique advantage AMSF offers is its history of paying out special dividends. While these aren’t guaranteed, the company has distributed extra cash to shareholders when business conditions allow. For long-term investors, that’s a nice bonus that can boost total returns over time.
Dividend Growth and Safety
While AMSF has maintained a steady dividend increase over the past several years, there are signs that growth may be moderating. The 5-year average dividend growth rate sits at about 6%, which is respectable but not accelerating.
The bigger concern is the decline in profitability. Earnings per share have dropped by more than 30% year-over-year, and revenue has taken a hit as well. That’s not an immediate red flag for dividend safety, but if the trend continues, it could put pressure on future raises.
Despite these challenges, the company is still in a strong financial position. The balance sheet remains solid, with virtually no debt and a healthy cash position. That provides a cushion if earnings remain under pressure, but it’s worth keeping an eye on how management navigates these headwinds.
Chart Analysis
AMERISAFE, Inc. (AMSF) has been through some notable price action over the past year, showing periods of strength followed by a cooling-off phase. The stock saw a significant rally late last year, pushing well above both the 50-day and 200-day moving averages. However, that upward momentum started fading as the price retraced back toward its longer-term trend.
The 50-day moving average (orange line), which had been rising steadily during the rally, is now rolling over, signaling that short-term momentum has weakened. At the same time, the 200-day moving average (blue line) has been trending slightly upward, suggesting that the broader long-term trend remains intact but isn’t strongly bullish. The stock is currently hovering right around the 50-day and 200-day moving averages, making this a critical level to watch.
Volume has been relatively low in recent weeks, with no major spikes indicating heavy buying or selling pressure. The one exception was during the late-year rally, when volume surged along with price gains. Since then, the stock has settled into a period of consolidation, with volume tapering off.
The Relative Strength Index (RSI) sits at 60.31, which is on the higher end of neutral. This suggests that while AMSF is not in overbought territory, it’s also not deeply undervalued from a momentum standpoint. A push above 70 would indicate overbought conditions, while a dip below 50 could signal further downside ahead.
Recent price action has shown some indecisiveness, with the last few candles reflecting both upward and downward wicks. This suggests a battle between buyers and sellers, with no clear directional trend taking hold just yet. If AMSF can hold above the 50-day and 200-day moving averages, it could find support and attempt another move higher. On the flip side, a breakdown below these levels could indicate that selling pressure is building.
Analyst Ratings
Recent Upgrades
📈 In October 2024, JMP Securities reiterated its “Market Outperform” rating for AMERISAFE, Inc. (AMSF), maintaining a price target of $65. This reaffirmation reflects the firm’s confidence in AMERISAFE’s business model and growth prospects, suggesting that the company is expected to perform better than the broader market. The rating was influenced by the company’s strong financial position, conservative underwriting approach, and history of steady dividend payments. Analysts noted that the stock’s valuation remains reasonable despite recent volatility, making it an attractive option for long-term investors.
Recent Downgrades
📉 In March 2022, Truist Securities downgraded AMERISAFE from a “Buy” to a “Hold” rating, adjusting the price target from $61 to $50. This downgrade indicates a more cautious outlook, possibly due to concerns about the company’s slowing revenue growth and declining earnings. Analysts pointed to macroeconomic factors, such as rising claims costs and potential pricing pressure in the workers’ compensation insurance market, as key reasons for the downgrade. Additionally, recent earnings reports showed a decline in profitability, which raised concerns about the company’s ability to maintain its historical dividend growth rate.
Consensus Price Target
📊 As of the latest available data, the consensus price target among analysts for AMERISAFE stands at $59.50. This target suggests an anticipated increase from the current share price, reflecting analysts’ collective expectations for the stock’s performance over the next 12 months. While some analysts remain bullish due to AMSF’s strong balance sheet and disciplined underwriting, others are more cautious given the recent earnings declines and industry challenges.
Earnings Report Summary
AMERISAFE, Inc. (AMSF) recently shared its latest earnings report, giving investors a closer look at how the company is performing. The numbers show a mix of strengths and challenges, reflecting both steady underwriting practices and some areas of pressure in its financials.
Fourth Quarter Highlights
In the fourth quarter, AMERISAFE reported $65.7 million in net premiums earned, which was slightly lower than the same period last year. Investment income, however, continued to grow, rising 5.7% to $8.1 million as the company benefited from better reinvestment rates. Net income for the quarter came in at $19.2 million, translating to earnings per share of $1.00—a 7.4% decline from the previous year.
On the underwriting side, AMERISAFE posted a profit of $9.5 million, though that was 20.2% lower than a year ago. The combined ratio, which measures the company’s underwriting efficiency, ticked up to 85.5%, compared to 82.0% in the prior-year quarter. That increase means the company had to allocate a slightly larger percentage of premiums to cover claims and expenses.
Full-Year Performance
Looking at the full year, net premiums earned totaled $267.1 million, down 1.7% compared to last year. However, investment income was a bright spot, climbing 15.1% to $31.3 million. Net income for the year landed at $62.1 million, with earnings per share coming in at $3.23—a solid 12.2% increase over the prior year.
Return on equity, a key measure of profitability, improved to 20.4%, up from 15.5% in 2022. Meanwhile, the combined ratio for the year rose slightly to 85.9%, reflecting a modest uptick in claim costs and operating expenses.
Operational Trends
One area of strength was AMERISAFE’s gross premiums written, which climbed 8.4% in Q4 to $60.3 million thanks to a higher policy count. Payroll audits and premium adjustments added another $4.8 million, a big jump from the $2.3 million recorded in the same period last year. For the full year, total gross premiums written rose 3.3% to $285.4 million.
The company’s loss ratio remained steady at 55.5%, meaning claims costs as a percentage of earned premiums were in line with historical levels. AMERISAFE also saw favorable loss reserve development from past accident years, which helped lower overall claims costs.
Investments and Capital Management
By the end of 2023, AMERISAFE’s investment portfolio, including cash, was valued at $896.5 million. Gains on equity securities added $5.1 million in Q4, helped by stronger stock market performance.
The company also continued its share repurchase program, buying back 46,741 shares at an average price of $46.45, totaling $2.2 million. Moves like this signal confidence from management and a commitment to returning value to shareholders.
Overall, AMERISAFE’s earnings show a company that remains financially stable, even as it navigates some pressures in the workers’ compensation insurance market. Revenue and underwriting profits were slightly weaker, but solid investment returns and careful expense management helped offset some of the downside.
Financial Health and Stability
One thing AMSF has always done well is managing its financials conservatively. This isn’t a company that takes on unnecessary risk, and that approach has paid off over time.
The company carries just $428,000 in total debt, which is nearly nothing compared to the $53 million in cash it holds. That level of financial strength allows AMSF to maintain its dividend even in tougher market conditions.
Another positive is its return metrics. A return on equity of over 20% is a sign that the company efficiently uses shareholder capital to generate profits. The current ratio, which measures liquidity, sits at a healthy 2.02, further reinforcing its financial stability.
However, the recent revenue decline of 7.6% suggests some challenges in maintaining growth. The insurance business can be cyclical, and while AMSF has historically been a strong performer, the current slowdown could be a factor in future dividend decisions.
Valuation and Stock Performance
At around $50 per share, AMSF is trading close to both its 50-day and 200-day moving averages, suggesting the stock is fairly valued at the moment.
The price-to-earnings (P/E) ratio sits at 17.6, which is reasonable but higher than historical levels. Looking forward, the P/E ratio jumps to 23, signaling that investors expect slower earnings growth. The price-to-book ratio of 3.76 is also on the high side, indicating the stock isn’t particularly cheap based on its assets.
Stock performance has been relatively stable, with a 52-week range between $41.97 and $60.24. Right now, shares are trading closer to the middle of that range, meaning there’s no obvious bargain unless earnings start showing signs of a turnaround.
Risks and Considerations
1️⃣ Declining earnings – A 31% drop in quarterly earnings isn’t something to ignore. If this continues, it could impact dividend growth and overall stock performance.
2️⃣ Slowing revenue – A decline of 7.6% in revenue suggests potential headwinds in the insurance market. AMSF has navigated downturns before, but investors should watch how management responds.
3️⃣ Valuation concerns – With a higher-than-usual price-to-earnings and price-to-book ratio, AMSF may not be as attractively priced as it has been in the past.
4️⃣ Dividend growth slowdown – While the current dividend is well-covered, future growth could be more modest than in previous years. Investors relying on dividend increases should keep an eye on earnings trends.
5️⃣ Low trading volume – With an average daily volume of around 88,000 shares, AMSF isn’t the most liquid stock. That could make it harder to enter or exit large positions efficiently.
Final Thoughts
AMSF has long been a reliable dividend payer, and its 3.07% yield makes it appealing for income investors. The company’s conservative financial management and history of special dividends add to its appeal.
However, recent earnings declines and slowing revenue growth raise some concerns about its ability to sustain the same level of dividend growth in the future. While the payout remains well-covered for now, further deterioration in profitability could change that equation.
For investors seeking stability and steady income, AMSF remains a solid choice. But for those looking for strong dividend growth, it may be worth watching how earnings trends develop before making any long-term commitments.
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