New Purchase MHLD

26 Nov 2014 01:03

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Today I increased my position in Maiden Holdings (MHLD) with an additional 100 shares that should contribute $52 annually towards my 2015 dividends. MHLD while a small stock with a market cap of only $960M it continues to be a bright spot as a dividend growth stock that is undervalued.

What I really like about this company is their continued focus on growing earnings and being extremely shareholder friendly. MHLD is a re-insurer and what usually makes me nervous with insurance companies is their ability to execute risk management and how or where they keep their investments.

MHLD has been implementing a strategy to exit high risk segments and entering predictable and stable operating segments. This strategy has paid off over the last three years as we have seen earning grow from $0.39 per share in 2011 to $1.18 per share in 2013.

In regards to investments, it is fairly common for insurance companies to invest in fixed income and MHLD is no different. The concern here is when interest rates rise bond prices will fall creating a potential loss. Fortunately, for MHLD, most of their fixed income bonds have a maturity of less than 10 years and only 2.2% of their bonds have a maturity greater than 10 years so if rates do rise losses will be minimal.

Of course their strength in managing risk & investments is not the only reason I invested. We can't forget about their juicy 4% dividend. In fact, MHLD has been extremely shareholder friendly with dividend increases for a CAGR of 19% and its most recent increase was 18%.


With an aggressive dividend growth rate I calculate a fair value range from $13.71 to $15.58 share price, with current share price as of 11/25/2014 of $13.18 per share it wasn't hard to see this was under my low end price target and a value buy I couldn't pass up.

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