Lincoln National

Ticker: LNC, Buy below $66.

Lincoln National is a Fortune 250 American holding company, which operates multiple insurance and investment management businesses.

Why I Would Buy

  1. Cheap – LNC is currently selling for > 8x trailing earnings and forward earnings.
  2. Below Book – The stock can be purchased below it’s book value (P/B: 0.93).
  3. Return on Equity – RoE has been at a high single digit level for the past decade.
  4. Low Payout Ratio – The dividend is a respectable 2%, but a payout ratio below 20% affords plenty of opportunity for future dividend growth.
  5. Strong Buyback – Management has announced an aggressive share buyback program, which is likely to be accretive to shareholders given the low valuations of the stock.

What Could Go Wrong

  1. Credit Rating – Long term debt of LNC is rated BBB+ by S&P, I would’ve liked higher ratings.
  2. RoE – Although decent, consistent double digit returns would’ve made the stock more attractive
  3. Relative Valuation – Not particularly cheap when compared to other large life insurers.

 

Disclosure: I am long LNC, please read additional disclosures here before taking any action based on this post.

 

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