US stocks are headed higher over the long run. How do I know? The Dow Jones Industrial Average was around 200 points back in 1950. It’s now coming up on 34,000 points. The US stock market compounds at an annual rate of nearly 10% over the long term.

It’s almost relentless.

Now, that’s an average – some years are exceptional, while others are poor. But too much focus on near-term volatility can cause you to miss the forest for the trees. What’s even more impressive is that some stocks can actually outpace this long-term average. High-quality dividend growth stocks are such a group.

These stocks represent equity in world-class enterprises that produce reliable, rising profits from providing the world with the products and/or services it demands.

Allstate Corp. (ALL) is an insurance company that operates as one of the largest property-casualty insurers in the United States.

Founded in 1931, Allstate is now a $38 billion (by market cap) insurance titan that employs more than 42,000 people.

Allstate primarily sells auto and homeowners insurance.

Property-casualty net underwriting premiums accounted for the vast majority of the company’s FY 2020 revenue. Of these premiums, they can be broken down into the following lines: auto insurance, 70%; homeowners, 23%; other personal lines, 5%; and commercial, 2%.

After the announcement that the company will be selling off its Allstate Life Insurance Company in 2021, its primary focus moving forward will be in property-casualty insurance.

Insurance has long been one of my very favorite business models.

It’s the very definition of making money from OPM (“other people’s money”).

Since most people can’t afford to cover catastrophic losses, they buy insurance to mitigate risk. You have built-in demand for something that almost sells itself.

An insurance company collects premiums upfront for shouldering that risk.

These premiums turn into a “float” and can earn significant returns during the time delay between premium collection and claim payout. This float is built entirely upon OPM.

Allstate has increased its dividend for 11 consecutive years, and is possibly one of the best stocks to buy now.

The 10-year dividend growth rate is 10.2%, which is solid in and of itself.

But it gets better. There’s been a marked acceleration in dividend growth of late; their most recent dividend increase, announced in February, came in at 50%!

This growth comes on top of the stock’s market-beating yield of 2.53%.

That yield, by the way, is more than 70 basis points higher than the stock’s own five-year average yield.

And the low payout ratio of 30.5% easily covers the dividend.

I like dividend growth stocks in the “sweet spot” – a yield of between 2.5% and 3.5%, paired with a high-single-digit (or better) dividend growth rate.

This stock is right there.

Morningstar rates ALL as a 3-star stock, with a fair value estimate of $103.00.

CFRA is another professional analysis firm, and I like to compare my valuation opinion to theirs to see if I’m out of line.

They similarly rate stocks on a 1-5 star scale, with 1 star meaning a stock is a strong sell and 5 stars meaning a stock is a strong buy. 3 stars is a hold.

CFRA rates ALL as a 5-star “STRONG BUY”, with a 12-month target price of $140.00.

My number is high, but I’d also argue that Morningstar’s number is too low. Averaging the three numbers out gives us a final valuation of $139.32, which would indicate the stock is possibly 9% undervalued.

Bottom line: Allstate Corp. (ALL) is a high-quality property-casualty insurance company with excellent fundamentals and accelerating growth. With a market-beating dividend, double-digit dividend growth, a low payout ratio, more than 10 consecutive years of dividend raises, and the potential that shares are 9% undervalued, this is a stock that should be on every dividend growth investor’s radar.

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