The Progressive Corporation On Track For Growth

Steady Growth Is On Tap For The Progressive Corporation

If you are looking for a steady, stable dividend payer with some growth in the forecast look no further than The Progressive Corporation (NYSE: PGR). This is one of the best-run companies on the market today, it's growing, and it comes with a dividend. While not a stellar dividend at only 0.65% yield the company is one of the safest payers on the market and one with a solid history of capital growth and more. The Progressive Company tends to pay out its extra earnings each year in the form of a special dividend that puts the regular payment to shame. 

The Progressive Corporation Monthly Update 

The Progressive Corporation is unusual in that it provides a monthly update on the business. The surprising factoid is that, while the YTD updates are very encouraging, the analysts have yet to get on board with what the company is telling us. The analysts are expecting a net decline in YOY earnings that we just don't see happening. The February report shows a slight downtick from January in terms of growth but double-digit growth is still on the table and is being driven by secular forces within the economy. Those forces, to be brief, include the growing population, the maturation of the Millennial generation, increased household creation, growing auto ownership, and the rise of the RV lifestyle. 

So, in February, the number of net premiums grew by 13% from the same month last year. The number of policies in force grew by 10% on strength in personal auto, up 13%, and business property, also up 13%. In terms of earnings, the company produced $354 million in net income or up 428% from last year which equates to $0.60 per share compared to $0.11. Profits would have been greater if not for higher catastrophe losses compared to January but the combined ratio is still below 100% and improved from last year. On a YTD basis, the company's net revenue is up 17% YOY with a 144% increase in net income. 

The Progressive Dividend, Small But Growing Fast 

The Progressive Corporation regular dividend isn't big but it is safe and growing fast. The 5-year distribution CAGR is running near 40% with a 7% payout ratio which is nice but still small potatoes compared to the annual special dividend that has been paid the last few years. Instead of jerking investors around with a randomly changing quarterly payout Progressive is paying a small, sustainable, quarterly dividend and then juicing the return at the end of the year. The special payout for 2020 was worth $4.50, double last year's payout and 5% of the stock price. 

The Technical Outlook: 

A look at the nearer-term daily charts is a bit misleading, the company has been stuck in a range over the last few months, but the weekly and monthly charts speak volumes. This stock is consolidating within a very strong uptrend and likely to set new all-time highs before the end of the year. That said, the near-term picture is a little weak so investors should expect to see price action move sideways if not lower over the next few weeks. If the $90 level doesn't hold up as support price action may fall as low as $88 or $86 before bottoming. Once support is reestablished we expect to see the stock begin moving higher in line with the underlying trend.