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Cincinnati Financial Corporation (NASDAQ:CINF), through its subsidiaries, offers commercial, personal, and life insurance products to businesses and individuals in the United States.

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CINF is on both the Dividend Aristocrats and High-Yield dividend aristocrats lists.

Over the past 10 years this dividend growth stock has delivered an average total return of 3.07% annually to its loyal shareholders. The company has also managed to deliver an impressive 18% average annual increase in its EPS.

The trend in ROE has followed the trend in earnings per share over our study period. This indicator was in a free fall from its 6.35% level in 1997 to its 2000 low 1.97%. After that it has been steadily rising to levels above 12%.

The company recently announced that it would raise its quarterly dividend by 3.5 cents to 39 cents per quarter, which represents a 9.9% increase from 2007. The company has increased its dividend for 48 consecutive years. CINF has averaged a 5 and 10 year dividend growth rates of 11.96% and 11.14% respectively. It's currently yielding a respectable 4.10% annually. The stock price has been trading in a narrow range over the past 10 years, which has offered a good entry points for dividend reinvestment at bargain prices.

An 11% growth in dividends translates into the dividend payment doubling every 7 years. If we look at historical data, going as far back as 1990, CINF has indeed managed to double its dividend payments every seven years.

If we invested $100,000 in CINF on December 31, 1997 we would have bought 2,295 shares (adjusted for a 3:1 split). Your first quarterly check would have yielded $319.19 in dividend income in early 1998. If you kept reinvesting the dividends though instead of spending them, your quarterly dividend income would have risen to $1,016 by December 2007 and you would be expecting to collect $1,126.32 dividend income in April 2008. For a period of 10 years, your quarterly dividend income has increased by 155%. If you reinvested it though, your quarterly dividend income would have increased by 218%.

I also like the fact that the company's dividend payout has not exceeded 50% over more than twice over the past 10 years in addition to the low P/E ratio which is less than 10 and the above average dividend yield of 4.10%. I think that this financial stock has been unfairly punished with the rest of the financial group simply because of its asset class.

Overall I think that CINF is a long-term buy for the dedicated dividend investor. I would be a buyer of the stock as long as P/E ratio is below 20, it is yielding above 2% and the dividend payout is below 50%. It's attractively valued for me with an above average yield of 3.90% and P/E of 8.

Disclosure: I own CINF

Source: Cincinnati Financial Corporation: For the Dedicated Dividend Investor