uploads///REV EPS AIG

How AIG’s Dividend Yield Compares


Nov. 8 2017, Updated 2:59 p.m. ET

AIG’s revenue and earnings in 2015 and 2016

American International Group’s (AIG) revenue fell 9% and 10% in 2015 and 2016, respectively. Its US and Japanese revenue rose in 2015 before falling in 2016, and revenue from Europe and other regions fell in both years, along with revenue from premiums, policy fees, and other income. Its net investment income was flat in 2016 after a fall in 2015.

The company’s losses and expenses rose 2% in 2015 before falling 5% in 2016. Its general operating expenses and interest expenses fell in both years, and its loss on debt extinguishment fell substantially. Its income from continuing operations fell 69% in 2015 and turned negative in 2016. Together, these developments translated into a 68% fall in the company’s EPS (earnings per share) in 2015 and negative EPS in 2016. Share buybacks enhanced its EPS.

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AIG’s revenue and earnings in 1H17

AIG’s revenue fell 5% in 1H17, its losses and expenses fell 9%, and its general operating expenses, interest expenses, and loss on debt extinguishment also fell. Its income from continuing operations rose 33%. These ups and downs translated into 59% EPS growth, which was enhanced by share buybacks.

AIG’s dividend yield

The company’s 58% dividend-per-share growth in 2016 has been followed by flat growth in 2017. As a result, its dividend yield curve has flattened, offset by a drop in its stock price. Its stock has fallen 5.1% YTD (year-to-date), compared with a 5% gain in 2016. AIG and other insurance companies worldwide are contemplating a premium hike due to the havoc wreaked by hurricanes Irma and Maria and earthquakes in Mexico. Donald Trump’s proposed financial regulations and tax policies could benefit the company.

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American International Group versus broad indexes

American International Group has a dividend yield of 2%, while the sector’s average PE (price-to-earnings) ratio is 52.4x and its dividend yield is 1.8%. The S&P 500 (SPX-INDEX) (SPY) offers a dividend yield of 2.3%, PE ratio of 22.6x, and YTD return of 15.6%. The Dow Jones Industrial Average (DJIA) (DIA) has a dividend yield of 2.3%, PE ratio of 21.1x, and YTD return of 19.1%. The NASDAQ (COMP-INDEX) (ONEQ) has a PE ratio of 25.3x and YTD return of 25.7%.

The iShares International Select Dividend ETF (IDV) is a dividend fund with 68% and 32% exposure to Europe and financials, respectively. It has a 3.9% dividend yield and a PE ratio of 13.5x. Meanwhile, the PowerShares S&P 500 High Dividend Low Volatility Portfolio ETF (SPHD) has 8% exposure to financials, a 3.5% dividend yield, and a PE ratio of 17.3x.


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