Dividend Kings In Focus: RLI Corp. – Sure Dividend

Printed on March nineteenth, 2025 by Bob Ciura

The Dividend Kings are a selective group of shares which have elevated their dividends for at the least 50 years in a row.

We imagine the Dividend Kings are among the many highest-quality dividend progress shares to purchase and maintain for the long run.

With this in thoughts, we created a full record of all of the Dividend Kings.

You’ll be able to obtain the total record, together with necessary monetary metrics akin to dividend yields and price-to-earnings ratios, by clicking the hyperlink beneath:

RLI Corp. (RLI) is the most recent member of the Dividend King record, having introduced its fiftieth consecutive annual dividend improve on February thirteenth.

This text will focus on the corporate’s enterprise overview, progress prospects, aggressive benefits, and anticipated returns.

Enterprise Overview

RLI Corp. is an insurance coverage firm that operates the next enterprise models: Casualty (healthcare & transportation insurance coverage), Property (hearth, earthquake, distinction in situations, marine, and many others.) and Surety (contract surety protection, licenses, and bonds).

Supply: Investor Presentation

RLI Company reported its fourth quarter earnings outcomes on January 22. The corporate reported revenues of $440 million for the quarter, which was up 1% year-over-year. Web earned premiums rose by 15% year-over-year.

Realized good points have been greater than through the earlier 12 months’s interval, which had a optimistic impression on the corporate’s reported revenues, however web unrealized good points have been decrease in comparison with the earlier 12 months’s quarter, offset among the income tailwinds.

Increased web funding revenue, which was up 19% 12 months over 12 months, was a tailwind for RLI’s profitability through the quarter.

RLI Company earned $0.41 per share on a non-GAAP, or adjusted, foundation through the quarter, which is the place RLI backs out one-time objects that may distort the image in the case of the corporate’s underlying earnings energy.

RLI’s backside line was decrease than through the earlier 12 months’s interval, however for all the 12 months of 2024, earnings have been up. RLI Corp is forecasted to see its earnings-per-share develop properly this 12 months, to greater than $3.00.

Development Prospects

RLI Corp. has not been capable of develop its income very persistently prior to now, as income moved sideways for a lot of the final decade.

That is, largely, as a result of low rates of interest lowered the revenue RLI can generate with its insurance coverage float at instances.

Since 2020, nonetheless, RLI Corp. has grown its earnings-per-share very properly, with earnings-per-share rising by greater than 100% between 2020 and 2024.

Increased rates of interest enable RLI Corp. to deploy its insurance coverage float in a extra worthwhile approach, thus a higher-rates surroundings is optimistic for the corporate, all else equal.

Supply: Investor Presentation

RLI has grown its premiums within the current previous, and due to additional premium progress, RLI ought to see its gross sales develop sooner or later.

We imagine that 3% annual earnings-per-share progress is a sensible long-term estimate, factoring within the current efficiency and the longer-term monitor file.

Aggressive Benefits & Recession Efficiency

Many monetary firms, together with some insurers, skilled important issue through the Nice Recession.

RLI remained worthwhile, and its earnings-per-share truly grew through the 2008-to-2010-time body. We imagine that RLI Company will likely be comparatively secure throughout future recessions as nicely.

RLI Company has raised its common dividend very steadily over time, which was potential as a consequence of ongoing will increase within the firm’s payout ratio over a few years.

Extra not too long ago, the dividend payout ratio has come down once more, and the dividend appears very sustainable for now.

Throughout the Nice Recession of 2008-2009, it steadily grew earnings-per-share every year in that point:

2008 earnings-per-share of $3.60
2009 earnings-per-share of $4.32 (20% improve)
2010 earnings-per-share of $6.00 (39 improve)

Valuation & Anticipated Whole Returns

Based mostly on anticipated 2025 earnings-per-share of $3.10, RLI inventory trades for a ahead P/E of 24.4. That is above our honest worth estimate of 19, that means shares seem overvalued.

RLI Company’s value to earnings a number of has been shifting in a really big selection prior to now. Shares have been valued at a low double-digit value to earnings a number of shortly after the Nice Recession, however the firm’s valuation a number of has exploded upwards since then.

RLI’s valuation stays elevated. We imagine that shares are buying and selling above honest worth and that a number of compression is probably going going ahead.

For instance, if the P/E a number of declines from 24.4 to 19 over the subsequent 5 years, it will scale back shareholder returns by -4.9% per 12 months over that timeframe.

Except for modifications within the P/E a number of, RLI also needs to generate returns from earnings progress and dividends. A projection of anticipated returns is beneath:

3% earnings-per-share progress
0.8% dividend yield
-4.9% a number of reversion

RLI has an everyday quarterly dividend, and periodically pays particular dividends as nicely. For instance, the corporate paid shareholders a particular dividend of $4.00 per share in 2024, and a $2.00 particular dividend in 2023.

Nonetheless, since particular dividends are irregular, we exclude them from our evaluation and as a substitute concentrate on the common quarterly payouts.

On this situation, RLI inventory is projected to generate a destructive whole return of -1.1% per 12 months over the subsequent 5 years.

Last Ideas

RLI Company is an insurance coverage firm which generated stable working outcomes lately, with written premiums and funding revenue rising at a pleasant tempo.

Earnings will doubtless proceed to develop through the subsequent couple of years, however not at a very quick tempo.

RLI Company doesn’t have a really sturdy long-term monitor file, despite the fact that outcomes throughout current years have been sturdy, whereas the outlook for 2025 is compelling as nicely.

Nonetheless, we imagine that shares are overvalued as we speak. Due to this, RLI Company earns a promote advice from Positive Dividend on the present valuation stage.