Progressive Stock Ahead of Earnings: Time to Buy?

Traders won’t want to miss out on PGR's high-yielding annual dividend

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Insurance giant Progressive Corporation (NYSE:PGR) has a lot on the horizon that investors can get excited about. On Dec. 4, Progressive declared a quarterly dividend of $0.10 per share and an annual dividend in the amount of $4.50 per share. In total, the company will be paying $4.60 per share on January 15, 2021. This payment will be made to all shareholders of record as of January 8, 2021. But before that, Progressive will step into the earnings confessional a week from today on Dec. 18.

So far this year, Progressive stock has tacked on an impressive 30%. And while the shares have pulled back from their Oct. 13 record high, their 160-day moving average has stepped up as support. And despite PGR's outperformance in 2020, 10 of 14 analysts in coverage rate it a "hold" or "strong sell," indicating a round of upgrades and/or price-target hikes could keep the wind at the stock's back.

PGR Stock Chart

PGR has a muted history of post-earnings reactions, averaging a historical move of 3.3% in the last eight quarters, regardless of direction. Overall though, Progressive has beat expectations on its  four most recent earnings reports. In the fourth quarter of 2019 the company topped its expectations by two cents. In the first quarter of 2020, Progressive exceeded expectations by a relatively larger margin of $0.39. An 11 cent beat the second quarter of 2020 is nothing to shake your fist at, and neither is the 17 cent, or 10% beat it scored in its most recent quarter.

The company has a forward dividend of $4.90 and a forward dividend yield of 5.28%. Progressive stock paid a total of $2.81 per share to investors in 2019. PGR has paid dividends since 1989.

From a fundamental point of view, Progressive is performing phenomenally. Its price-earnings ratio is currently at a very low 10.84. The company also has had incredible revenue and net income growth over the past few years. Progressive has added more than $15 billion in revenue since 2016 and has nearly quadrupled its net profits in just four years. In addition, the company just raised its dividend to a yield currently over 5%. Progressive does carry a substantial amount of debt at $5.58 billion, but also has a hefty $4.76 billion in cash. Overall, Progressive stock presents a great opportunity for high yielding dividend returns and decent future stock growth.

One word of caution for prospective options traders though. Progressive stock currently ranks an incredibly low on the Schaeffer's Volatility Scorecard (SVS), with a score of just 14 out of 100. This scorecard is used to identify which underlying stock options have historically had underpriced or overpriced options. Low SVS readings like this one point to Progressive stock having consistently realized lower volatility than its options have priced in -- pointing to PGR being a potential premium-selling candidate, rather than a premium-buying candidate.


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