Aflac Incorporated, through its subsidiary, American Family Life Assurance Company of Columbus (Aflac), provides supplemental health and life insurance in the USA and Japan. The company is member the S&P Dividend Aristocrats index.
Aflac has consistently increased dividends for 27 consecutive years. The company announced a 16.70% dividend raise in October 2008.
Between June of 1999 up until June 2009 this dividend growth stock has delivered an average total return of 3.90% annually. The stock fell from its all time high of $68.81 in 2008 to a multi-year low of $10.83 in March 2009, before recovering by 300% off its lows.
The company has managed to deliver a 10.80% average annual increase in its EPS between 1999 and 2008. Aflac is expected to earn $4.70 share in FY 2009, followed by $5.15/share in FY 2010. The company generates over 70% of its revenues in Japan. New distribution channels in the country for Aflac’s supplemental health and life insurance plans, which are not covered by Japanese healthcare, would drive sales in the future. The brand recognition that the company is building in the US should also be a strong driver of growth over time, in addition to focusing on retirement services targeting the baby boomers.
The Return on Equity has ranged over the past decade between a low of 12% and a high of 19%. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.
Annual dividends have increased by an average of 22.90 % annually since 1999, which is higher than the growth in EPS. The disparity is mostly due to a gradual increase in the dividend payout ratio and the amounts this insurer has spent on stock buybacks.
A 23 % growth in dividends translates into the dividend payment doubling almost every three years. If we look at historical data, going as far back as 1986, Aflac has actually managed to double its dividend payment every four and a half years on average.
The dividend payout ratio has increased rather sharply over the past two years, but is still much lower than my 50% threshold. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
Currently Aflac is trading at 16 times 2008 earnings, yields 2.70% and has an adequately covered dividend payment. I would be looking forward to adding to my position in Aflac (AFL) on dips below $37.30.
Full Disclosure: Long AFL
- 5 dividend stocks increasing their payments in this tough market
- Why do I like Dividend Aristocrats?
- 12 Dividend Stocks to own in this market
- Cincinnati Financial – An insurance stock to own
Warren Buffett is the most successful investor of all time. Warren Buffett was able to keep learning about investments and business from t...
When selecting a dividend stock, investors should look at the dividend last. Income investors should first focus on profitability when inves...
One of my favorite aspects of dividend growth investing is the ability to receive more passive dividend income, simply because I made the ri...
As a dividend investor, my main goal is to attain financial independence when dividend income exceeds expenses by an adequate margin o...
There are many risks to investing . One of the major risks that could ruin a portfolio’s chances of generating adequate dividends are p...
In my investing, look for businesses I can understand that have some sort of a competitive advantage that translates into consistent earn...
Rebalancing is the process where investors sell an asset that takes an above average allocation in their portfolio, and use the proceeds to ...
There are several factors that drive future investment returns. The important drivers behind future returns on equity investments include: ...
Wal-Mart Stores Inc. (NYSE:WMT) operates retail stores in various formats worldwide. The company operates through three segments: Walmart U....
For the first three to four years of my transformation into dividend growth investing, I managed to develop a process of identifying attrac...