People often forget that Berkshire Hathaway is an insurance company. Warren Buffett loves the structure, as it allows him to play/invest all the float from premiums to earn higher returns. When done right, it can produce decades worth of profits and cash flows. Our latest Best Dividend Capture Stocks List pick has been doing right for over 60 years, producing high profits from its float and increasing its dividend. Its latest was another 8% bump higher!
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Our pick’s niche within the insurance industry is property & casualty (P&C), which offers various products to insure life, assets and home, among others. Our pick covers both individuals and businesses. The combination allows it to provide strong underwriting and collect a variety of different premiums into its coffers.
What it does next is special. Like a mini-Berkshire, our pick has been very successful at re-investing much of that float into various high-growth asset classes like stocks and real estate. While regulations require much of an insurance company’s float be tucked away in safe assets, the interest generated from the float can be used according to the company’s discretion. For our pick, it equals a hefty dose of equities. This has allowed the firm to generate high profits even in years that show poor insurance underwriting losses, such as the pandemic.
Our pick has continued to find growth as well. The firm has expanded into higher and more profitable business lines for businesses and high-net-worth individuals. Insuring a yacht or protecting a business from cyber-crime is expensive, and our pick has been able to profit from this fact. All in all, it’s managed to help drive cash flows, premiums and investment income further.
The combination of strong underwriting and investment on float has allowed our pick to be a top-notch dividend stock – and, as such, a great dividend capture play. A dividend capture strategy involves buying a stock before its ex-dividend date and then selling it after it has recovered the payout. With an ex-dividend date of Monday, March 18, our pick is primed for the strategy, as is evident from its historical track record of a recovery period within an average of 5.2 days after going ex-dividend.
For investors looking for a quick total return of income and capital appreciation, our latest insurance stock could be a lucrative option.
