For Income Investors:
Mercury General |  - Co. Spotlights available via RSS feed
| Decades Of Higher Dividends
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Income is a big part of investors' returns. Stocks, mutual funds and fixed income ideas in this column are featured because they are relatively solid in their ability to pay dividends or interest. We're giving income investors a resource to start their research for investments that give better yields with lower risk. | | MCY | $37.41 | Why It's Featured: Better than average dividend; solid growth; plenty of cash.
Keep an Eye On: Reclassification of rksks for better pricing; rate rises. | Dividend Yield | 6.3% | | Dividend/Earnings | 69% | | Financial Strength | B++ | | Div. Date: 9/29 | Ex-Div: 9/14 |
September 21, 2011 - Mercury General Corporation (MCY-NYSE), together with its subsidiaries, writes private passenger and commercial automobile insurance in the United States. The company also writes homeowners, mechanical breakdown, fire, umbrella, and commercial automobile and property insurance.
It offers various types of coverage, such as bodily injury liability, underinsured and uninsured motorist, personal injury protection, property damage liability, comprehensive, collision, and other hazards to automobile policyholders. The company sells through a network of independent agents and brokers in 13 states. Mercury General Corporation was founded in 1960 and is headquartered in Los Angeles, California. Income investors like stocks that raise dividends, especially ones that make it an annual habit. MCY is one of those stocks. Back in 1995, the dividend was 40 cents. Each year since then, the payout has gone up, sometimes by only a penny, sometimes by as much as 24 cents, but never lower. Today, the annual distribution is $2.40. It takes 85% of earnings to pay for it. Mercury weathered several storms (literally) well. It wasn't exposed to regions that had devastating floods or wind damage this year. That helped earnings grow by 17% in the June quarter compared to last year's second period even though sales were basically flat. Earnings for the full year are expected to be $2.82 (consensus of 5 analysts), well above last year's $2.10 a share. For 2012, the range from analysts for earnings is $2.45 to $3.15. Part of Mercury's success is due to strong underwriting and cost controls. Underwriting reflects management's focus on minimizing risk, selling policies to either good drivers at great rates or poor drivers at higher rates to compensate for inevitable claims. (Premiums from private passenger insurance were 82.7% of 2010 revenues, by far the largest part of Mercury's business.) Look for continued improvement (as shown by lower losses from claims) in underwriting.
The company is trying to raise rates on its car policies but finds the going tough. Prices of gas and the cost of living in general compete for insurance dollars, and while all drivers are required to have insurance, the industry is so competitive that other providers can be found for less money. California is the company's main market and adds another reason price hikes are hard: unemployment runs high in the Golden State. While a little slow to the party, Mercury launched an online site for policy sales. A full application can now be submitted via the Web, lowering costs. Furthermore, it is attempting to reclassify its business segmentation in an effort to change its rating, allowing it to reprice some of its offerings. Currently the company is overpricing some risks and underpricing others. The new classification will remedy some of these anomalies. Essential numbers:
- Market Cap: $2.08 billion
- Trailing P/E: 11
- Forward P/E: 13
- Price to sales ratio: .75
- Price to book: 1.15
- Operating margin (last 12 months): 8.64%
- Profit margin (last 12 months): 6.66%
- Return on equity: 10.39%
- Return on assets: 3.63%
- Revenues (last 12 months): $2.83 billion
- Total Cash: $3.42 billion
- Cash per share: $62.43
- Total debt: $265.81 million
- Total debt/ equity: 14.41%
- Beta: .8
- 52-week change: - 2.97%
- Total shares Outstanding: 54.83 million
- Float: 26.75 million
- Insiders own 51.19% of the stock
- Institutions have 39.8% of the Float. Income investors will like the price history of MCY. It's been mostly flat over the last 2 years, not pariticpating in the large gyrations that the majority of stocks suffered. While there are no large catalysts about to propel the stock higher, its solid earnings history suggests that a dramatic downward move isn't likely either. |
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