Linked here is a detailed quantitative analysis of Harleysville Group Inc. (HGIC). Below are some highlights from the above linked analysis:Company Description: Harleysville Group Inc. is a regional holding company for property and casualty insurance companies that operates in 32 states, primarily in the eastern half of the U.S.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
- Avg. High Yield Price
- 20-Year DCF Price
- Avg. P/E Price
- Graham Number
Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:
- Free Cash Flow Payout
- Debt To Total Capital
- Key Metrics
- Dividend Growth Rate
- Years of Div. Growth
- Rolling 4-yr Div. > 15%
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:
- NPV MMA Diff.
- Years to > MMA
Other: HGIC is a member of the Broad Dividend Achievers™ Index.
Conclusion: HGIC earned one Star in the Fair Value section, earned two Stars in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a total of four Stars. This quantitatively ranks HGIC as a 4 Star-Buy.
Using my D4L-PreScreen.xls model, I determined the share price could increase to $39.27 before HGIC's NPV MMA Differential decreased to the $1,200 minimum that I look for in a stock with 23 years of consecutive dividend increases. At that price the stock would yield 3.44%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $1,200 NPV MMA Differential, the calculated rate is 5.7%. This dividend growth rate is less than the 8.0% used in this analysis, thus providing a margin of safety. HGIC has a risk rating of 1.50 which classifies it as a low risk stock.
HGIC underwrites property and casualty insurance policies and offers commercial automobile, workers’ compensation, and multiperil insurance, as well as personal automobile and homeowner’s insurance. The company markets its policies through almost 2,000 insurance agencies, and maintains offices in about a dozen states. On October 27, 2009, HGIC agreed to assume Delta’s book of Delta Lloyds Flood Insurance Business effective November 1, 2009. The company has a strong balance sheet with very little debt. Although its free cash flow per share fell 46% in 2009, the company still has sufficient room to grow its dividend with a current free cash flow payout of only 35%. HGIC is trading below my buy price of $37.78 and thus earns serious consideration as a future buy, as my allocation allows. For additional information, including the stock's dividend history, please refer to its data page.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I was long in HGIC (2.2% of my Income Portfolio). See a list of all my income holdings here.
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