Dividend Kings In Focus: RLI Corp.

Printed on March nineteenth, 2025 by Bob Ciura

The Dividend Kings are a selective group of shares which have elevated their dividends for no less than 50 years in a row.

We consider 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 possibly can obtain the complete record, together with vital monetary metrics comparable to dividend yields and price-to-earnings ratios, by clicking the hyperlink under:

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

This text will talk about 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 items: Casualty (healthcare & transportation insurance coverage), Property (hearth, earthquake, distinction in situations, marine, and so forth.) 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. Internet earned premiums rose by 15% year-over-year.

Realized good points had been increased than in the course of the earlier yr’s interval, which had a optimistic impression on the corporate’s reported revenues, however internet unrealized good points had been decrease in comparison with the earlier yr’s quarter, offset a number of the income tailwinds.

Increased internet funding earnings, which was up 19% yr over yr, was a tailwind for RLI’s profitability in the course of the quarter.

RLI Company earned $0.41 per share on a non-GAAP, or adjusted, foundation in the course of 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 in the course of the earlier yr’s interval, however for your entire yr of 2024, earnings had been up. RLI Corp is forecasted to see its earnings-per-share develop properly this yr, to greater than $3.00.

Development Prospects

RLI Corp. has not been capable of develop its earnings very persistently previously, as earnings moved sideways for a lot of the final decade.

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

Since 2020, nevertheless, 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 permit RLI Corp. to deploy its insurance coverage float in a extra worthwhile method, thus a higher-rates atmosphere 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 consider that 3% annual earnings-per-share progress is a sensible long-term estimate, factoring within the current efficiency and the longer-term observe file.

Aggressive Benefits & Recession Efficiency

Many monetary companies, together with some insurers, skilled vital problem in the course of the Nice Recession.

RLI remained worthwhile, and its earnings-per-share truly grew in the course of the 2008-to-2010-time body. We consider that RLI Company will likely be comparatively steady throughout future recessions as properly.

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

Extra just lately, the dividend payout ratio has come down once more, and the dividend appears very sustainable for now.

Through 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% enhance)
2010 earnings-per-share of $6.00 (39 enhance)

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 truthful worth estimate of 19, which means shares seem overvalued.

RLI Company’s value to earnings a number of has been transferring in a really wide selection previously. Shares had 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 consider that shares are buying and selling above truthful 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 might cut back shareholder returns by -4.9% per yr over that timeframe.

Other than adjustments within the P/E a number of, RLI must also generate returns from earnings progress and dividends. A projection of anticipated returns is under:

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

RLI has a daily quarterly dividend, and periodically pays particular dividends as properly. 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 an alternative concentrate on the common quarterly payouts.

On this state of affairs, RLI inventory is projected to generate a unfavorable complete return of -1.1% per yr over the subsequent 5 years.

Remaining Ideas

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

Earnings will possible proceed to develop in the course of the subsequent couple of years, however not at an excessively quick tempo.

RLI Company doesn’t have a really sturdy long-term observe file, although outcomes throughout current years had been sturdy, whereas the outlook for 2025 is compelling as properly.

Nonetheless, we consider that shares are overvalued at this time. Due to this, RLI Company earns a promote advice from Certain Dividend on the present valuation degree.