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Monday, May 20, 2013

Recent Buy: TRV

May 20, 2013: Bought 29 shares of TRV at $86.31 per share.

The Travelers Companies, Inc. (TRV) was founded in 1853 and is based in New York, New York. Through its subsidiaries, TRV provides various commercial and personal property and casualty insurance products and services to businesses, government units, associations, and individuals primarily in the United States.  

TRV is a Dividend Challenger with an 9-year streak of dividend increases. It pays dividends in March, June, September and December. At $86.31 per share, TRV has a dividend yield of 2.32%.

Fair value estimates for TRV vary from $86.00 (MorningStar) to $100.38 (Graham Number method) to $102.80 (S&P Capital IQ). My purchase price of $86.31 is discounted by about 16% to the median of these estimates ($100.38), as required by my stock selection criteria.

The following table provides some key statistics for TRV.
The sum of TRV's dividend yield and its 5-yr dividend growth rate is 11.95%, which is just below the 12% I require according to the Chowder Dividend Rule. TRV's 5-yr total payback percentage is 13.13%, which is below 16% as required by my selection criteria
TRV passes the following of my selection criteria:
  • Dividend Payout ratio is 30.35% (below 65%)
  • Debt to Equity ratio is 23% (below 50%)
  • 7-year weighted average dividend growth rate is 10.78% (at least 7%)
  • Forward P/E ratio is 11.10 and the trailing twelve month (TTM) P/E ratio is 13.10 (below 16%)
TRV passes 7 out of 10 of my selection criteria, though 2 of the misses are related. Consequently, TRV earns 6 stars: (*******)

Other ratings for TRV

(see Recent Buy: CVX for details on these ratings)
MorningStar Rating (*****)
The Motley Fool's CAPS Rating(*****)
S&P Capital IQ's Stock Report(*****)Buy 
Thomson Reuters StockReport+ (9/10)Positive 

Final Remarks

Its getting harder to find reasonably valued dividend growth stocks. This past weekend, I've expanded my search to include stocks offering yields of less than 2.75%. Fortunately, there are some strong dividend growers in the 2% to 2.75% range. I found TRV in this process. It has experienced strong dividend increases of 10%, 9.09%, 13.89%, 12.2% and 8.7% in the past 4 years. 

29 shares of TRV represents $58.00 of expected annual dividend income. For the 2013 calendar year, this purchase adds $43.50 of expected dividend income, or a total of $876.41 for 2013.

I now own shares in 8 different companies in DivGro.

Full Disclosure: Long TRV

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