Updated 3/5/25
American Financial Group, Inc. (NYSE: AFG) is a well-regarded name in the specialty insurance industry, known for its strong underwriting discipline and shareholder-friendly approach. The company operates primarily in property and casualty insurance, providing coverage through a variety of niche markets. With a history of delivering consistent results and returning capital to investors, AFG has built a reputation as a reliable dividend stock.
For income-focused investors, AFG stands out not only for its stable base dividend but also for its track record of special dividends, which have provided an extra boost to shareholder returns. With financial strength, steady cash flow, and a conservative payout ratio, AFG remains a compelling option for those looking to build an income-generating portfolio.
Let’s break down its dividend profile and assess whether it’s a stock worth considering for long-term dividend investors.
Key Dividend Metrics
📌 Forward Annual Dividend Yield: 2.54%
📌 Trailing Annual Dividend Yield: 2.40%
📌 5-Year Average Dividend Yield: 1.99%
📌 Annual Dividend Rate: $3.20 per share
📌 Payout Ratio: 27.72%
📌 Ex-Dividend Date: March 17, 2025
📌 Dividend Payment Date: March 28, 2025
📌 History of Special Dividends
Dividend Overview
AFG has consistently paid and grown its dividend over the years, which is a key consideration for long-term investors seeking income. With a forward dividend yield of 2.54%, the stock is currently offering a higher-than-usual payout compared to its five-year average yield of 1.99%. That suggests the dividend yield is somewhat elevated, making it an appealing entry point for income investors.
One of the standout features of AFG’s dividend strategy is its history of special dividends. While these extra payouts are never guaranteed, the company has demonstrated a pattern of rewarding shareholders when excess capital allows. This makes AFG unique compared to companies that only offer fixed quarterly payouts.
Another important factor is the company’s conservative payout ratio of 27.72%. This signals that the dividend is well covered by earnings, leaving room for future increases while ensuring financial stability. A low payout ratio also provides a cushion during economic downturns, giving the company flexibility to maintain its dividend even in challenging conditions.
Dividend Growth and Safety
Dividend growth is an important aspect of any long-term income strategy, and AFG has delivered consistent increases over the years. While it may not have the longest track record of annual raises, its ability to grow the dividend while maintaining a strong financial position is a positive sign.
One of the reasons AFG’s dividend remains safe is its strong cash generation. The company has operating cash flow of $1.15 billion, providing a solid foundation to support its dividend payments. Unlike companies that may rely on debt to fund distributions, AFG generates sufficient earnings and cash flow to cover its payouts organically.
Additionally, AFG’s business model is built on disciplined underwriting, which helps protect profitability even during volatile economic periods. As long as the company maintains its careful approach to risk management, its dividend should remain well-supported for years to come.
Chart Analysis
The price action of American Financial Group (AFG) over the past year has followed a classic cycle of accumulation, rally, and subsequent correction. For most of the chart, the stock trended higher, riding the support of its 50-day moving average (orange line) above the longer-term 200-day moving average (blue line). However, things took a turn recently, with a decisive breakdown below both moving averages, signaling a shift in momentum.
The stock reached a peak around $150 in December, followed by a sharp decline that accelerated in early February. The 50-day moving average has rolled over, crossing below the 200-day moving average, a sign of weakening momentum. This forms a death cross, a bearish technical event that often indicates further downside unless the stock can reclaim higher levels.
Volume also tells an interesting story. There were heavy spikes in selling pressure during the breakdown phase, particularly in late January and early February. That suggests institutional investors or large holders may have been reducing their positions. More recently, volume has normalized, but without a strong influx of buyers, the stock’s ability to rebound remains uncertain.
In the past few sessions, there has been a bounce off recent lows near $120, pushing the stock back up to $126.63. However, this is happening in the context of a broader downtrend. The 50-day moving average around $130 is now acting as resistance, meaning the stock will need strong buying momentum to break back above it. If it fails, another leg lower could be in play.
The Relative Strength Index (RSI), displayed at the bottom of the chart, reflects recent weakness. It had fallen deep into oversold territory, dipping below 30 in February, which often precedes a short-term relief rally. Currently, RSI is recovering but remains at relatively low levels, meaning the stock is not yet in strong bullish momentum.
The last five candlesticks show a mix of indecision and some upward movement, but the presence of long upper wicks indicates that sellers are stepping in at higher levels, preventing a sustained move higher. If buyers fail to gain control soon, the downtrend could resume.
Analyst Ratings
Recent analyst evaluations of American Financial Group (AFG) present a balanced perspective, reflecting both cautious and optimistic outlooks.
Downgrades:
- Keefe, Bruyette & Woods: On February 7, 2025, this firm revised its rating for AFG from “Outperform” to “Market Perform,” adjusting the price target downward from $164 to $144. The decision was influenced by expectations of limited reserve releases and elevated casualty loss picks, which could pressure earnings and constrain share price appreciation in the near term.
- Piper Sandler: Similarly, Piper Sandler downgraded AFG to “Neutral” from “Overweight,” setting a price target of $129. This adjustment reflects a more cautious stance on the company’s near-term performance.
Upgrades:
- Piper Sandler: In a previous assessment, Piper Sandler had increased its price target for AFG from $135 to $150, assigning a “Neutral” rating. This earlier optimism was based on the company’s solid financial performance and growth prospects.
Consensus Price Target:
As of the latest analyses, the average 12-month price target for AFG stands at approximately $143.50, suggesting a potential upside of around 13.92% from current levels. This consensus reflects a range of forecasts, with the highest at $150 and the lowest at $137, indicating varied analyst expectations regarding the company’s future performance.
These mixed ratings underscore a cautious yet optimistic sentiment among analysts, balancing potential growth opportunities against challenges that may impact AFG’s financial performance in the near term.
Earning Report Summary
American Financial Group (AFG) recently reported its fourth-quarter 2024 earnings, and while there were a few bumps along the way, the company still delivered a solid performance.
Net earnings came in at $255 million, which was a slight dip from the $263 million reported in the same quarter last year. It wasn’t a dramatic drop, but it does show that AFG faced some challenges. On a per-share basis, earnings landed at $3.12, just a touch below analysts’ expectations of $3.15—not a huge miss, but enough to make investors take notice.
Revenue was a bright spot, coming in at $1.98 billion, which topped estimates of $1.91 billion. That’s a strong signal that the company’s insurance operations are holding up well, even in a market that’s seen its share of volatility.
The property and casualty insurance business, which is AFG’s bread and butter, had another strong quarter. The company’s combined ratio—a key measure of underwriting profitability—stood at 92.5%, which means they’re doing a solid job managing risk and keeping claims costs under control.
Investment income was another highlight, adding a boost to overall profitability. AFG has been smart with its investment strategy, which helped cushion some of the pressure from rising costs and market fluctuations.
On the shareholder front, AFG continued its tradition of returning cash to investors with a special dividend of $2.00 per share. This extra payout, scheduled for March 28, 2025, shows confidence in the company’s financial position and its ability to reward long-term investors.
Looking ahead, AFG is sticking to what it does best—strong underwriting, careful investments, and smart capital management. With a solid balance sheet and a diverse portfolio, the company seems well-prepared to handle whatever the market throws its way.
Overall, the latest earnings report was a mix of steady performance, minor setbacks, and some promising signs for the future. While earnings dipped slightly, revenue growth and disciplined risk management suggest AFG remains in a good spot heading into the next quarter.
Financial Health and Stability
A company’s financial strength is crucial for sustaining dividend payments, and AFG has a solid balance sheet that reinforces its reliability as an income stock.
- Total cash on hand: $1.48 billion
- Total debt: $1.72 billion
- Debt-to-equity ratio: 38.54%
- Return on equity (ROE): 20.33%
With a strong cash position and a manageable level of debt, AFG is well-positioned to continue returning capital to shareholders. Its debt-to-equity ratio of 38.54% is reasonable for an insurance company, as insurers typically carry a certain level of leverage to maximize returns.
Another important indicator of AFG’s financial health is its return on equity, which stands at 20.33%. This suggests that the company is effectively using its capital to generate profits, a key factor in maintaining long-term dividend sustainability.
Valuation and Stock Performance
AFG is currently trading at a price-to-earnings (P/E) ratio of 11.90, which suggests that the stock is reasonably valued relative to its earnings. Looking ahead, its forward P/E of 10.89 indicates that analysts expect earnings growth to continue, making the stock look even more attractive from a valuation standpoint.
Other valuation metrics include:
- Price-to-book ratio: 2.37
- Enterprise value-to-revenue: 1.28
- 50-day moving average: $131.35
- 52-week range: $118.97 to $150.19
At its current price, AFG is trading closer to the lower end of its 52-week range, which may present an opportunity for investors looking for an attractive entry point. The stock’s beta of 0.77 also indicates that it is less volatile than the broader market, making it a more stable option for conservative investors focused on dividends.
Risks and Considerations
While AFG has many strengths, investors should always consider the potential risks before investing.
- Interest rate sensitivity – As an insurance company, AFG holds a significant portfolio of fixed-income investments. Rising interest rates can impact the value of these assets, although they may also improve future investment returns.
- Insurance underwriting risk – The company’s profitability depends on maintaining favorable underwriting margins. If claims rise unexpectedly or competition pressures pricing, earnings could be affected.
- Economic cycles – While AFG has historically navigated economic downturns well, slowdowns in business activity can lead to reduced demand for insurance products.
- Stock price volatility – While AFG’s dividend remains stable, its stock price can fluctuate. Investors focused on capital preservation should be mindful of market conditions when entering or exiting a position.
Final Thoughts
American Financial Group, Inc. is a well-managed insurance company with a strong history of returning capital to shareholders. Its combination of a consistent base dividend, periodic special dividends, and financial stability makes it an attractive option for long-term income investors.
With a conservative payout ratio, strong cash flow, and disciplined risk management, AFG has all the qualities of a reliable dividend stock. While no investment is without risk, AFG’s track record suggests it is well-equipped to navigate industry challenges while continuing to reward shareholders.
For those looking for a dependable income stream with the potential for additional special dividends, AFG is a stock worth keeping on the radar.
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