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Research analysts at Compass Point initiated coverage on shares of Mercury General Corp. (NYSE:MCY) in a report released on Thursday, reports. The firm set a “neutral” rating and a $47.00 price target on the stock. Compass Point’s price target points to a potential downside of 9.77% from the company’s current price.

The analysts wrote, “Mercury General is the fourth largest writer of personal auto in the state of California and the fifteenth largest writer in the U.S. “The company continues to focus on enhancing its footprint outside of California, but we believe that will remain difficult as their advertising budget pales in comparison to those on the list above them. They have generally outperformed their peer group on an underwriting basis, but in the state of California that spread has narrowed within the loss ratio. And while the demographic trends within the state of California remain positive for market growth, the company’s venture outside of the state has not been as successful and they are paying higher commissions to attract business. “Reserves appear muddled as the company has a habit of releasing reserves in early years, only to later increase reserves in excess of what was initially released. The company has the majority of their investments in municipal securities, which could come under pressure. We will continue to track the Federal Reserve’s Liquidity Coverage Ratio (LCR) rulemaking as it could negatively impact the value of MCY’s municipal bond book over the medium-term. Insiders own over 51% of the company which likely explains the company’s high dividend yield. But with a dividend payout ratio of over 100% for the past two years, there is increased risk about the sustainability of the dividend without the company generating realized gains. “We rate MCY a Neutral with a $47 price target.”

Shares of Mercury General Corp. (NYSE:MCY) traded down 0.17% on Thursday, hitting $52.00. The stock had a trading volume of 12,317 shares. Mercury General Corp. has a 1-year low of $41.70 and a 1-year high of $52.58. The stock’s 50-day moving average is $49.36 and its 200-day moving average is $47.05. The company has a market cap of $2.859 billion and a P/E ratio of 12.86.

Mercury General Corp. (NYSE:MCY) last posted its quarterly earnings results on Monday, July 28th. The company reported $0.83 earnings per share for the quarter, beating the analysts’ consensus estimate of $0.68 by $0.15. The company had revenue of $698.80 million for the quarter, compared to the consensus estimate of $733.20 million. During the same quarter last year, the company posted $0.63 earnings per share. Mercury General Corp.’s revenue was up 5.0% compared to the same quarter last year. On average, analysts predict that Mercury General Corp. will post $2.80 earnings per share for the current fiscal year.

The company also recently declared a quarterly dividend, which is scheduled for Thursday, September 25th. Investors of record on Thursday, September 11th will be given a dividend of $0.615 per share. This represents a $2.46 dividend on an annualized basis and a yield of 4.72%. The ex-dividend date of this dividend is Tuesday, September 9th.

A number of other analysts have also recently weighed in on MCY. Analysts at Keefe, Bruyette & Woods downgraded shares of Mercury General Corp. from a “market perform” rating to an “underperform” rating in a research note on Monday, August 18th.

Mercury General Corporation (NYSE:MCY) is an insurance holding company.

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