Categories Analysis, Finance

Why Progressive Corp. (PGR) stock deserves to be on your watch list

The company recently declared an annual dividend of $1.50 per share and a quarterly dividend of $0.10 per share

The pandemic has taken a toll on almost all industries, but its impact on the insurance sector has been mixed so far. The Progressive Corporation (NYSE: PGR), a company focused on auto insurance, benefited from a dip in automobile-related claims due to fewer road accidents during the shutdown, but its other business segments saw an increase in claims linked to COVID-linked losses.

Read management/analysts’ comments on quarterly reports

At its peak, Progressive’s shares traded slightly above the $100-mark around seven months ago but entered a volatile phase since then. Though the stock is quite affordable right now, analysts’ cautious outlook calls for caution. The target price indicates a decline through 2022.

Dividend Program

Though the company has been distributing dividends for several years, the lack of consistency in payments could be a concern for income investors. But, PGR has what it takes to survive the present headwinds, so it makes sense to keep an eye on the stock and wait for tangible cues on its growth prospects.

trending stocks high volatility

The Mayfield-based company, an industry leader in commercial auto insurance, this week declared an annual dividend of $1.50 per share and a quarterly dividend of $0.10 per share, payable on December 29, 2021, and January 14, 2022, respectively. The annual dividend more than halved from the prior-year level, reflecting a marked decrease in full-year earnings per share.

Blessing in Disguise

The number of accident-related claims dropped significantly since early last year as fewer vehicles hit the roads during the pandemic, which in turn translated into profits for insurers like Progressive. But much of those benefits were offset by events caused by bad weather this year as the corresponding increase in claims weighed on the finances of companies, especially property insurers.

Going into 2022, the market reopening and vaccination drive should help the company revive the business, but a full recovery would depend on how soon normalcy returns to the market. Meanwhile, the pandemic-related uncertainty is expected to persist in the near future, affecting Progressive’s overall performance and making it difficult to achieve the financial goals.

“Commercial auto continues to capitalize on the macroeconomic environment with its third straight quarter of double-digit PIF growth, largely due to growth in the for-hire trucking segment. Through our underwriting actions often have the unfortunate side effect of reducing growth, our product managers continue to scour the competitive landscape to find profitable growth opportunities,” said Tricia Griffith, chief executive officer of Progressive Corporation.

Q3 Outcome

In the three months ended September 2021, total revenues increased 8% annually to $11.86 billion. At $11.36 billion, net premium earned was up 14% year-over-year. Meanwhile, third-quarter net income decreased to $111.8 million or $0.19 per share from $1.52 billion or $2.59 per share in the same period of last year. The top-line beat the estimates, but earnings missed the view.

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Progressive’s stock traded higher in the early hours of Wednesday, staying slightly above its 52-week average, after closing the previous session up 1%. In the past six months, the stock gained about 4%.

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