Allstate Sweetens the Deal With a Dividend Hike: Should You Bite?

Property and casualty insurer, The Allstate Corporation ALL, recently announced an 8.7% or 8 cents hike in its quarterly dividend payout. In its latest shareholder-friendly move, ALL raised its quarterly dividend to $1 per share (annualized $4 per share).The hiked dividend will be paid out on April 1, 2025, to shareholders of record as of March 10. Allstate offers a current dividend yield of 2.12% compared with the Insurance - Property and Casualty industry’s 0.26%. Its above-industry dividend yield is a huge positive for income-seeking investors. This highlights confidence in its cash flow and prospects.Allstate has raised its dividend five times over the past five years, highlighting its commitment to shareholder returns. A consistent dividend growth track record often signals strong financial health and offers better capital appreciation potential than stocks with flat payouts. ALL’s steady dividend increases also imply that it is more resilient to market volatility, serving as a hedge against economic uncertainty and political risks.Allstate’s Dividend Growth Image Source: Zacks Investment ResearchFurthermore, Allstate announced a total of $29.3 million in dividends across three series of preferred stock for the Jan. 15 - April 14, 2025 period. These dividends will be paid in cash on April 15 to shareholders on record as of March 31.Allstate’s Share Repurchase PlanIn addition, Allstatehas recently approved a new $1.5 billion share repurchase program for outstanding common stock, effective through Sept. 30, 2026. Its previous $5 billion buyback authorization expired on March 31, 2024. Since 1995, the company has repurchased 793 million shares for $43.2 billion, reducing overall common shares outstanding by 634 million, or 70.5%, primarily through buybacks.Given this background, the question that naturally arises is whether investors should buy Allstatestock at current levels. Let us delve deeper to answer the question.ALL’s Key Growth Drivers to WatchAllstate is sharpening its business focus by doubling down on core strengths and shedding underperforming segments. In recent times, it announced two major divestitures: selling its Employer Voluntary Benefits business to StanCorp Financial for $2 billion and its Group Health business to Nationwide for $1.25 billion in cash. The fate of its Individual Health business remains undecided, with options to retain or sell it.These strategic exits, along with cost-cutting efforts, aim to improve efficiency, boost underwriting profitability and reinvest savings into technology and product innovation. Despite challenges like catastrophe losses and legal hurdles, Allstate is prioritizing customer acquisition and expanding its direct-to-consumer model. Investments in digital capabilities and an enhanced customer experience position the company for sustained growth and a larger market share.Premium growth has been a key driver of Allstate’s success, supported by a diversified portfolio, strategic acquisitions and disciplined pricing. Net premiums earned have steadily increased — rising 13.9% in 2021, 8.7% in 2022, 10.4% in 2023 and 11.3% in 2024 — demonstrating the strength of its growth strategy.Allstate’s Earnings Estimates & Surprise HistoryThe Zacks Consensus Estimate for 2025 adjusted earnings for Allstate is currently pegged at $18.74 per share, indicating 2.3% year-over-year growth. The consensus mark for 2026 earnings signals further 15% growth. The consensus estimate for 2025 and 2026 revenues suggests 8.3% and 7.6% year-over-year increases, respectively.It beat earnings estimates in each of the past four quarters, with an average surprise of 127.1%.The Allstate Corporation Price and EPS Surprise The Allstate Corporation price-eps-surprise | The Allstate Corporation QuoteAllstate Stock is InexpensiveALL is trading comparatively cheap at the moment from a valuation standpoint. Its forward earnings multiple of 9.82X is lower than its five-year median of 10.89X and the industry average of 29.16X. The stock also looks attractively valued relative to other insurers like The Progressive Corporation PGR and The Travelers Companies, Inc. TRV, with forward 12-month P/E of 18.39X and 13.87X, respectively. Allstate now has a Value Score of B. Image Source: Zacks Investment ResearchShould You Buy ALL Stock Now?While Allstate has strong growth drivers, investors should consider some headwinds that can limit its short-term gain. The insurance market's intense competition makes maintaining attractive pricing difficult. This could potentially impact Allstate's ability to retain and attract customers.As of Dec. 31, 2024, the debt was $8.1 billion, while the cash balance was only $704 million. A high level of debt induces interest expense woes. Interest expenses rose 5.5% year over year in 2024. Its total debt-to-total capital of 27.95% is higher than the industry’s average of 16.74%. This can add pressure to the company’s financials.The stock is trading below the 50-day moving average, indicating a bearish trend.ALL Stock Trading Below 50-Day SMAImage Source: Zacks Investment ResearchThe increasing number of vehicles on the road, inflationary pressures, supply chain disruptions and advancements in automotive technology have driven up car repair and replacement costs, likely leading to higher auto claims.This will likely result in lower margin growth for the auto business.Allstate stock has declined 9.5% over the past three months, lagging behind both the industry and the S&P 500, reflecting investor caution. The recent wildfires in Los Angeles have caused substantial economic losses, with Allstate estimating its pre-tax losses, net of reinsurance, at approximately $1.1 billion.Price Performance - ALL, PGR, TRV, Industry & S&P 500 Image Source: Zacks Investment ResearchAdditionally, regulatory actions, such as the California insurance commissioner’s one-year moratorium on non-renewals and cancellations in wildfire-affected areas, may have raised concerns about Allstate’s operational flexibility and financial impact. Furthermore, the ongoing rate cuts by the Fed are likely to impact the insurance sector’s investment income.With Allstate currently carrying a Zacks Rank #3 (Hold), new investors might consider staying on the sidelines and waiting for a more favorable entry point. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report The Travelers Companies, Inc. (TRV): Free Stock Analysis Report The Allstate Corporation (ALL): Free Stock Analysis Report The Progressive Corporation (PGR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks