American Financial Group, Inc. (NYSE:AFG) is the kind of insurance stock that can easily slip under the radar. It doesn’t have the excitement of a high-growth technology company, but it has something income investors often look for: a long history of growing its dividend. AFG has raised its regular dividend for 21 straight years, but how does it compare with two other insurance giants? Find out here.
Its latest increase was also a meaningful one. The company raised the annual dividend by 10.2%, from $3.52 to $3.88 per share, or $0.97 per quarter. Over the past decade, the regular dividend has grown at an annualized rate of 12.1%.
That dividend record is impressive, but it doesn’t tell the whole story. The more important question is whether AFG’s business is strong enough to keep supporting that growth and whether the stock is reasonably valued today.
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AFG is having a better year than you might think
AFG’s latest results give investors plenty to work with. The company reported $2.99 in GAAP EPS in the second quarter of 2026, up from $2.07 a year earlier. Core net operating earnings also jumped 32% year over year to $2.82 per share. The rest of the quarter was strong, too. AFG generated a 19.2% core operating return on equity, while pretax property and casualty operating income reached a record $350 million.
The underlying insurance business is growing as well. Net written premiums rose 6% in the second quarter, and AFG’s Specialty P&C operations posted a 91.5% combined ratio. That last number is worth paying attention to. A combined ratio below 100% means an insurer is making money from its underwriting before investment income is even considered. So, at least for now, AFG isn’t relying only on investment returns to produce good results. The core insurance business is doing its part.
A 21-year dividend streak is hard to ignore
American Financial Group, Inc. isn’t a stock you buy purely for its dividend yield. At roughly $138 per share, the new $3.88 annual dividend works out to a yield of about 2.8%. The growth of that dividend is more interesting.AFG has increased its regular dividend every year for 21 years, and the latest increase was more than 10%. The company has also paid special dividends over the years. In February 2026, it paid a $1.50 special dividend in addition to the regular payout.
Those special dividends shouldn’t be counted on as regular income. They aren’t guaranteed and can vary depending on the company’s financial position. Still, they show that AFG has been willing to return excess capital to shareholders. The regular dividend also looks well supported by cash flow. AFG generated $566 million in operating cash flow during the first half of 2026, while paying $271 million in common-stock dividends.
That means operating cash flow covered the dividends by roughly 2.1 times. For an insurance company, that’s a useful cushion. It suggests AFG isn’t having to borrow money or stretch its finances just to keep the regular dividend going. AFG may be flying under the radar, but what about Buffett’s favorite financial stocks? See the 10 names here.
AFG’s valuation looks reasonable, but there’s a catch
AFG currently trades at roughly 11 times forward earnings, based on analysts’ expectations for 2026. Consensus estimates call for adjusted EPS of about $12.39 this year, compared with $10.29 in 2025. That’s roughly 20% earnings growth. At around 11× expected earnings, investors are paying about $11 for every $1 of earnings AFG is expected to generate this year.
That doesn’t look like a demanding valuation for a company expected to grow earnings by double digits. But there’s a catch. Analysts expect EPS to come in at about $12.14 in 2027, slightly below the 2026 estimate. That suggests some of the earnings growth we’re seeing this year may be temporary rather than the start of a much faster growth phase. That’s important when looking at the 11× multiple. AFG doesn’t need to deliver years of aggressive growth to justify its current valuation. At the same time, investors probably shouldn’t build their expectations around another 20% increase in earnings next year.
The bigger question for AFG investors
American Financial Group, Inc.’s story is fairly simple. The insurance business is producing strong underwriting results, earnings are growing, and the company is returning capital to shareholders. The 2.8% dividend yield isn’t especially high. But the picture changes when you look at the 21-year streak and the roughly 12% annualized dividend growth over the past decade.
The valuation is another reason to pay attention. At roughly 11× forward earnings, the stock isn’t carrying the kind of valuation that would require years of rapid growth to make sense. The bigger thing to watch is what happens when the strong earnings growth expected in 2026 starts to normalize. If AFG can continue producing solid underwriting results while growing its earnings and dividend, the current valuation becomes more interesting.
For investors looking at AFG, that combination of dividend growth, profitability, and valuation may be more useful than simply looking at the 2.8% yield.
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This article is originally published at Insider Monkey.
