Insurance Against a Market With Little Value

Using Guru’s All-in-One Stock Screener, I tried to find any companies that paid dividends for over 10 years, were trading below book value, had a dividend yield over 1%, trading at a P/FCF ratio of 10 or below, with a cash to debt ratio of at least 1, we are left with 15 companies.  The company with the lowest price to book ratio was Kansas City Life Insurance.  Kansas City Life Insurance(KCLI) is an insurance company that has been in existence for over 115 years.  It has branches across the continental U.S. and in Europe.

With a dividend yield of 2.4%, KCLI has a decent dividend that could interest dividend investors.  KCLI has been paying quarterly dividends since 1985, but these dividends have fluctuated with no real pattern of growth or decline. This could be a red flag to investors, signaling that the company shouldn’t be a large part of the portfolio.

KCLI does seem financially strong.  Trading at only .6 times its book value, with a tangible book value of 69.72, an investor can feel a little at ease knowing that the company could offer a return on investment even if it were liquidated today. KCLI is also trading at only 9.55 its free cash flow generating abilities.  I particularly like to buy companies trading at or below a P/FCF of 15, so KCLI fits my investment philosophy.  KCLI also has generated $5.16 in free cash flow per share.  These all seem to be good signs for this company.

When we input $5.16 into Guru Focus’ DCF calculator, we get a fair value of $76.11 with a margin of safety of 42% before adding tangible book value.  KCLI seems like a solid investment that value investors can be confident in, especially in a market with very few value investment prospects.

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