American Financial's Robust Financial Strength Fuels Dividend Growth

American Financial Group, Inc. AFG recently announced a substantial increase in its annual common stock dividend, underscoring its commitment to rewarding shareholders. The move reflects the insurer’s strong financial position and long-term growth prospects.

Approved by the board of directors, the regular annual dividend has now been increased to $3.88 per share of common stock from $3.52. This increase represents a remarkable 10.2% rise over the previously declared rate. Effective October 2026, the increased dividend will be paid quarterly at 97 cents per share of common stock. The latest hike marks the 21st consecutive year of dividend increases. 

Based on the closing price of $143.65 as of Aug. 20, the company’s dividend yield is 2.4%, which is much above the industry average of 0.2%. This makes the stock an attractive pick for yield-seeking investors.

The 10-year compound annual growth rate for the company's regular annual dividends stands at an impressive 12.1%. This track record underscores its prudent financial management and stability.

Financial Strength and Capital Management

AFG's compelling and diversified mix of specialty insurance businesses, entrepreneurial culture, disciplined operating philosophy and an astute team of in-house investment professionals continue to position it to create value for shareholders through a variety of insurance market conditions. 

During the second quarter of 2026, the insurer returned nearly $100 million to shareholders, including $26 million in share repurchases and an 88-cent-per-share regular quarterly dividend. AFG expects its operations to continue to generate significant excess capital throughout the remainder of 2026, which provides ample opportunity for acquisitions, special dividends, or share repurchases. As of June 30, 2026, AFG held approximately $406 million in cash and investments. 

Returning capital to shareholders in the form of regular and special cash dividends and through opportunistic share repurchases is an important and effective component of the capital management strategy. In addition, capital will be deployed into AFG’s core businesses as it identifies the potential for healthy, profitable organic growth, and opportunities to expand its specialty niche businesses through acquisitions and start-ups that meet the target return thresholds.

AFG’s strong underwriting margins, healthy premium growth and higher P&C net investment income set a new second-quarter record for pretax P&C operating income. This level of performance contributed to an annualized core operating return on equity of 19%. These results, coupled with effective capital management and an entrepreneurial, opportunistic culture and disciplined operating philosophy, enable us to continue to create value for shareholders. Return on equity, a profitability measure of how efficiently a company utilizes its shareholders' money, was 20.3% in the trailing 12 months, compared favorably with the industry average of 7.4%.

Zacks Rank and Price Performance

American Financial currently carries a Zacks Rank #3 (Hold). Shares of AFG have gained 6.8% over the past year compared with the industry’s 2.7% growth.

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Stocks to Consider

Some better-ranked stocks from the property and casualty insurance industry are The Hanover Insurance Group, Inc. THG, Mercury General Corporation MCY and First American Financial Corporation FAF. While THG and MCY sport a Zacks Rank #1 (Strong Buy) each, FAF carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Hanover Insurance’s earnings surpassed estimates in each of the last four quarters, the average surprise being 27.33%. Shares of THG have jumped 28.1% in the past year. The Zacks Consensus Estimate for THG’s 2026 and 2027 revenues implies year-over-year growth of 4.6% and 4.5%, respectively.

Mercury General’s earnings surpassed estimates in each of the last four quarters, the average surprise being 70.21%. Shares of MCY have jumped 36.7% in the past year. The Zacks Consensus Estimate for MCY’s 2026 earnings implies year-over-year growth of 61.3%.

First American’s earnings surpassed estimates in each of the last four quarters, with an average surprise of 23.58%. Shares of FAF have gained 11.3% in the past year. The Zacks Consensus Estimate for FAF’s 2026 and 2027 earnings implies year-over-year growth of 17.5% and 4%, respectively.

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This article originally published on Zacks Investment Research (zacks.com).

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