According to up-to-date research, there are only seven companies in the whole of Europe that have increased their dividends every year for the past 20. Chesnara is one of them.
A life insurer and pensions group formed in 2004, Chesnara is an anagram of ‘earns cash’ – and bosses are determined it lives up to its name.
Dividends were generous from the off, with almost 12p during the first year of operation.
That doubled to 24p by 2023 and brokers expect more growth, with 24.7p pencilled in for this year, 25.4p for next and more than 26p by 2026. With Chesnara shares at £2.60, stock is clearly delivering impressive annual income of almost 10 per cent, particularly attractive when most savings rates are less than half that and the stock market more broadly is on a yield of little more than 3.5. per cent.
Chesnara provides pension and life policies for around a million customers across the UK, Sweden and Holland. The group started with one insurance business, Countrywide Assured, originally part of estate agent Countrywide.
In safe hands: Chesnara provides pension and life policies for around a million customers across the UK, Sweden and Holland
But there have been several acquisitions, with boss Steve Murray keen for more.
Most of Chesnara’s businesses are closed to new members so there are no marketing costs, profits are predictable over many years and the group is able to focus on making sure existing customers stay happy. By their nature, however, these types of businesses become smaller over time, as policies mature or pensioners pass away.
Chesnara compensates by making acquisitions, including some in the so-called ‘open’ space, where businesses are actively seeking new members. A workplace pension division in Sweden does just that, as does Scildon, a Dutch subsidiary acquired from Legal & General.
Steve Murray, a lifelong insurance man, joined in 2021, when the firm’s acquisition programme was rather dormant.
Since then, activity has picked up with a handful of carefully chosen deals here in the UK and in northern Europe.
Further purchases are expected. Murray is in active discussions with would-be sellers and new finance chief Tom Howard has made sure the group can move quickly if need be, with a chunky war chest of £200 million.
Delivering half-year results last week, they expressed confidence in the future. Chesnara is generating plenty of cash, its balance sheet is robust and the money it manages has increased from £11.5 billion to £11.9 billion.
Murray is also focused on making Chesnara more efficient to the benefit of both customers and investors.
The right acquisitions should help that along, creating economies of scale in the way the group’s businesses are run and policies administered.
Today, Chesnara is smaller than many in the industry. But this, too, can work in Murray’s favour, allowing him to assess deals that many larger companies just would not countenance.
Midas verdict: When Midas first looked at Chesnara, it was 2012 and the shares were £1.90. The stock had risen to more than £4 by 2018 but today the price is just £2.60. That seems to reflect neither past performance nor future prospects. Existing investors should hold onto their shares and remember, they have amassed £2.40 of dividend payments over the past 12 years. New investors could also see value at current levels.
Traded on: Main market Ticker: CSN Contact: chesnara.co.uk
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