FAF Boosts Shareholders' Value Via Dividend Hike, Shares Rise

Shares of First American Financial Corporation FAF gained 2.7% in the last trading session after the title insurer announced an increase in its quarterly cash dividend, showcasing its commitment to rewarding its shareholders. This move is a testament to the insurer’s strong financial position and long-term growth prospects.

Approved by the board of directors, the regular quarterly dividend has now been increased to 55 cents per share of common stock from 54 cents. This increment represents a remarkable 2% rise over the previously declared rate.

Based on the stock’s Sept. 10 closing price of $66.21, the new dividend will yield 3.2%, which is better than the industry average of 0.2%. Also, the payout ratio of 42.69 compares favorably with the industry average of 9.4. This makes First American an attractive pick for yield-seeking investors. Shareholders of record on Sept. 22 will receive the increased dividend on Sept. 29.

Historically, FAF has a solid track record of dividend increase, with the metric witnessing a nine-year (2017-2025) CAGR of 5.5%.

Financial Strength and Capital Management

Besides regular dividend hikes, this provider of title insurance, settlement services, and risk solutions remains committed to returning excess cash to shareholders through share repurchases. First American also engages in share buybacks. In July 2025, the board approved a new share repurchase plan, which authorizes the repurchase of up to $300 million of shares. During the six months ended June 30, 2025, FAF repurchased shares for $88.7 million and, as of June 30, 2025, FAF has repurchased and retired shares under the previous authorization for $343.3 million.

The dividend hike and increase in repurchase authorization reflect the insurer’s strong financial condition, liquidity, and long-standing commitment to return capital to stockholders.

First American enjoys a strong liquidity position to enhance operating leverage. Its strong liquidity not only mitigates balance sheet risks but also paves the way for accelerated capital deployment. 

As of June 30, 2025, the holding company’s sources of liquidity included $114.2 million of cash and cash equivalents and $900 million available on the company’s revolving credit facility. Management believes that liquidity at the holding company is sufficient to satisfy anticipated cash requirements and obligations for at least the next 12 months. 

Return on equity, a profitability measure of how efficiently a company utilizes its shareholders' money, was 10.4% in the trailing 12 months, which compared favorably with the industry average of 7.6%.

Robust operational performance, solid investment performance, and strong capital management are likely to help FAF in sustaining the dividend streak.

Zacks Rank and Price Performance

Shares of this Zacks Rank #3 (Hold) title insurer have gained 9% year to date, outperforming the industry’s growth of 7.5%. FAF’s policy of ramping up growth and capital position should help the stock retain momentum.

Another Insurer on the Same Path

Arch Capital Group Ltd.’s ACGL board of directors increased the authorization for its existing share repurchase program by $2 billion in September 2025. With this increased authorization and recent share repurchases during the third quarter of 2025, nearly $2.3 billion of share repurchases remains available under the program as of Sept. 4, 2025.

The P&C insurer has maintained a robust capital position over the years, reflecting its financial flexibility. The company’s robust capital not only mitigates balance sheet risks but also paves the way for accelerated capital deployment.

Stock to Consider

Another better-ranked stock from the property and casualty insurance industry is Heritage Insurance Holdings, Inc. HRTG and The Hanover Insurance Group, Inc. THG. While HRTG sports a Zacks Rank #1 (Strong Buy), THG carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Heritage Insurance’s earnings surpassed estimates in each of the last four quarters, the average surprise being 360.66%. Shares of HRTG have jumped 97.4% in the past year. The Zacks Consensus Estimate for HRTG’s 2024 and 2025 earnings implies year-over-year growth of 103.98% and 1.22%, respectively. 

The Hanover Insurance’s earnings surpassed estimates in each of the last four quarters, the average surprise being 360.66%. Shares of THG have jumped 17.8% in the past year. The Zacks Consensus Estimate for THG’s 2024 and 2025 earnings implies year-over-year growth of 17.6% and 3.9%, respectively.

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This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research