10%-Yield Amerisafe Stock Could Be Great Insurance Stock for Income Seekers
February 2, 2024
Why Investors Should Pay More Attention to AMSF Stock
If you’re on the hunt for investment income, don’t overlook insurance companies like Amerisafe, Inc. (NASDAQ:AMSF). In addition to paying reliable quarterly dividends, Amerisafe stock offers robust special dividends.
Before going into details about AMSF stock, here’s a primer on how insurance companies make money. They do it in two ways:
1. They sell insurance policies—for cars, homes, life, etc.—and collect premiums for providing protection.
2. Instead of just sitting on their premiums, they put on their investing hats and use that capital to make even more money. They might invest in things like stocks, bonds, or real estate.
Warren Buffett loves insurance companies for this very reason. In fact, if you look at the investment portfolio of his company, Berkshire Hathaway Inc (NYSE:BRK.B), you’ll find a few insurance companies in there. They can be lucrative.
Based in DeRidder, Louisiana, Amerisafe, Inc. provides workers’ compensation insurance to small and midsized employers in hazardous industries such as agriculture, construction, logging and lumber, manufacturing, and trucking. (Source: “Amerisafe Announces 2023 Third Quarter Results,” Amerisafe, Inc., October 25, 2023.)
The company markets workers’ compensation insurance in 27 states.
Robust Q3 Financial Performance
Amerisafe, Inc. is great at what it does. On October 25, 2023, it reported its third-quarter financial results. There were encouraging numbers across the board. (Source: Ibid.)
Management reported net premiums earned of $66.63 million and net investment income of $8.1 million. Its net premiums earned were slightly lower than in the same period a year earlier, but its net investment income more than compensated for it by growing by more than 16%. Its net income amounted to $9.96 million, or $0.52 per diluted share.
Amerisafe, Inc. also reported a third-quarter net combined ratio of 90.6%. For the first three quarters of 2023, its net combined ratio was 86.1%.
Combined ratio is a very important measure when assessing insurance companies. A combined ratio below 100% suggests that a company is making an underwriting profit. A reading above 100% means it’s paying out more money in claims than it’s getting in premiums.
Amerisafe Stock Comes With Enticing Dividends
At first glance, AMSF stock’s dividend yield doesn’t look that impressive. In 2023, it paid quarterly dividends of $0.34 per share, which only brings its dividend yield to about 2.9% (as of this writing). (Source: “Dividends,” Amerisafe, Inc., last accessed January 23, 2024.)
But here’s the kicker: Amerisafe, Inc. has a track record of also paying special dividends. In 2023, its special dividend was a one-time payment of $3.50 per share in December.
So, its total dividend for the year was $4.86 per share. That brings Amerisafe stock’s dividend yield above 10%, which is certainly an inflation-crushing figure.
Those special dividends have really acted as an income booster. Since 2004, Amerisafe has declared 11 special dividends, totaling $42.89 per share (as of October 25, 2023). Of that total, $9.64 represented regular dividends and $33.25 represented special dividends. (Source: “Amerisafe Declares Special Dividend of $3.50 Per Share and Regular Quarterly Dividend,” Amerisafe, Inc., October 25, 2023.)
Traders Could Be Accumulating AMSF Stock
Since late 2022, Amerisafe stock’s price has primarily consolidated and traded in a relatively tight range, with support around $45.00 and resistance around $51.00. Currently, its share price sits near the bottom of that range.
Although Amerisafe, Inc.’s share price has been rangebound since late 2022, it has found a lot of support around its 200-week moving average. AMSF stock’s price has tested this level several times and has rebounded.
This says the long-term trend for Amerisafe stock is pointing upward, and it’s possible that traders are using the stock’s 200-week moving average as a buying point.
Chart courtesy of StockCharts.com
The Lowdown on Amerisafe, Inc.
Amerisafe is an insurance company that’s been reporting solid financial performances and rewarding investors. Over the past 11 years, the company has paid $42.89 per share in regular and special dividends to its shareholders.
The outlook for AMSF stock is bullish.
Interest rates are expected to remain at their current levels for some time, and even if they swing lower, it’s hard to imagine them going down to zero any time soon. This could be great for Amerisafe, Inc. when it comes to investing its premiums. The company’s extra investment income, along with its premiums, could mean bigger dividends for Amerisafe stockholders.
