People forget that Berkshire Hathaway is actually an insurance company. That’s because we often focus on its mix of stocks, businesses and other assets. But the reason why Warren Buffett loves the structure and why Berkshire is able to buy all those stocks comes down to float. Insurance companies are forced to place paid premiums into various assets to cover potential claims. These assets earn interest and insurance companies can do whatever they want with that interest and some of the premium funds. This is called float and makes for a free stream of money for shareholders. It’s what has helped Berkshire build a huge empire.
It’s also helped our latest Best Dividend Stocks List pick win as well.
Our new pick is a global leader in the insurance and risk management sector, operating in more than 150 countries worldwide. This focus on underwriting, insurance brokerage and similar products for wholesale and retail clients has continued to build up an impressive empire. Shareholders have been rewarded as well. Our pick has been able to raise its payout by over 40% since the end of the Great Recession.
But there’s still plenty of growth ahead for our new insurance pick.
That’s because our selection is focused on several high-growth areas, including diving head first into higher-margined consulting business lines as well as owning renewable energy assets with its float. Those clean energy assets are providing plenty of tax savings and boosting profits even further. Bolt-on M&A in the insurance brokerage business is also helping assert our pick’s dominance in the sector.
All in all, our new pick is proving that boring insurance can be very exciting and pay plenty of dividends from a juicy float.
To summarize, here are five reasons why you should own this stock:
- One of the largest insurance brokerage firms, and pulling in more than $5 billion in sales last year.
- Global footprint with offices in 49 countries and sales in more than 150.
- Increased its dividend for the past 10 years straight with its latest jump being nearly 5%.
- Found growth in clean energy assets and continued M&A transactions. Focus on risk management has boosted margins.
- Healthy payout ratio of 42% and growing yield of 1.70%.
Our Best Dividend Stocks List has 20 of the highest-rated stocks by our proprietary Dividend.com Rating system. Go Premium to find out the entire list.
Removal of an Industrial Name
The industrials have been a mixed bag since the start of the coronavirus pandemic. For many, the contraction in global economic activity has been a real drag. Sadly, that’s been the case for one of the picks in the sector. Despite its long-term promise and operating niche, these times have not been good for our pick. Its valuation is now more expensive than several growth stock names. Many of its Dividend.com Rating metrics have fallen below our thresholds and we’ve been forced to remove it from our list.
