The last time I wrote about The Travelers Companies, Inc. (NYSE:TRV) I bought a small batch stating that I thought I could get it at a cheaper price in the near future. The stock did indeed move downwards to the tune of 5.24% but has since then recouped some of those losses. The stock is up 1.78% excluding the dividend (up 2.34% including the dividend) since last writing the article versus the 4.99% gain the S&P500 (NYSEARCA:SPY) posted. Travelers is engaged in providing a range of commercial and personal property and casualty insurance products and services to businesses, government units, associations and individuals. On October 22, 2013, the company reported third quarter earnings of $2.30 per share. In the past year the company's stock is up 20.52% excluding dividends (up 22.87% including dividends), and is losing to the S&P 500, which has gained 27.51% in the same time frame. With all this in mind, I'd like to take a moment to evaluate the stock on a fundamental, financial and technical basis to see if it's worth buying more shares of the company right now for the financial sector of my dividend portfolio.
The company currently trades at a trailing 12-month P/E ratio of 11.3, which is inexpensively priced, but I mainly like to purchase a stock based on where the company is going in the future as opposed to what it has done in the past. On that note, the 1-year forward-looking P/E ratio of 10.87 is currently inexpensively priced for the future in terms of the right here, right now. Next year's estimated earnings are $8.14 per share and I'd consider the stock inexpensive until about $122. Below is a comparison table of the fundamentals metrics for the company for when I wrote all articles pertaining to the company.
EPS Next YR ($)
My Target Price ($)
On a financial basis, the things I look for are the dividend payouts, return on assets, equity and investment. The company pays a dividend of 2.26% with a payout ratio of 26% of trailing 12-month earnings while sporting return on assets, equity and investment values of 2.9%, 11.8% and 7.8%, respectively, which are all respectable values. Because I believe the market may get a bit choppy here and would like a safety play, I don't believe the 2.26% yield of this company is good enough for me to take shelter in for the time being. The company has been increasing its dividends for the past nine years at a 5-year dividend growth rate of 9.6%. Below is a comparison table of the financial metrics for the company for when I wrote all articles pertaining to the company.
Payout TTM (%)
Looking first at the relative strength index chart (RSI) at the top, I see the stock muddling around in middle-ground territory with downward trajectory and a value of 53.15, indicating a bearish pattern. I will look at the moving average convergence-divergence (MACD) chart next. I see that the black line is above the red line with the divergence bars flattening out in height, indicating the bearish pattern is losing momentum. As for the stock price itself ($88.45), I'm looking at $92.41 to act as resistance and the 50-day simple moving average (currently at $86.53) to act as support for a risk/reward ratio, which plays out to be -2.17% to 4.48%.
- Goldman Sachs (NYSE:GS) recently cut the rating on the company to "Neutral" stating "the case for multiple expansion is increasingly difficult."
- Back in late October Sandler O'Neill removed its "buy" rating on the stock stating third quarter earnings results beat expectations, is flush with cash, and the buyback was boosted. I believe this rating cut was done just to book some profits as the quarter was solid for the company.
- The company boosted its buyback program by $5 billion.
The company easily beat forecasts and announced the $5 billion buyback in late October and is up 1.95% since reporting earnings. The earnings estimates have been increased since the last time I wrote about it and I believe the stock is now inexpensively valued based on future earnings. Financially the company has improved its returns on equity but the dividend is too low to be hiding out in the name if you're looking for shelter if there is to be some market turbulence. On a technical basis I'd expect the stock to trend upwards for the short term and for these reasons I will be buying a small batch in the stock right now. I'd like to see it come in a bit more before plowing a bigger amount of cash into the stock.
Disclaimer: This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!