Friday, August 20, 2010

Stock analysis: Aflac Incorporated (AFL)

Aflac Incorporated (AFL), through its subsidiary, American Family Life Assurance Company of Columbus (Aflac), provides supplemental health and life insurance. The company offers cancer plans, general medical indemnity plans, medical/sickness riders, care plans, living benefit life plans, ordinary life insurance plans, and annuities in Japan. This dividend aristocrat has raised dividends for 46 years in a row. The company most recently announced a 9.70% dividend increase to 34 cents/share.

Over the past decade, this dividend stock has delivered an annual total return of 8.10%.

At the same time the company has managed to increase earnings per share by 10.90% per year. In 2009, earnings per share increased by 21.70% to $3.19. Analysts are estimating FY 2010 and FY 2011 EPS to increase to $5.46 and $5.99 respectively.

Return on Equity has increased from 16% in 2000 to 20% in 2009. In addition to that this indicator has remained between 16 and 20 since 2004.

The annual dividend per share has increased by 23.30% annually over the past decade. A 23% increase in dividends translates into the dividend payment doubling every 3 years on average. Sicne 1984 the company has managed to double dividends every four years on average.

The dividend payout ratio has almost tripled over the past decade, from 13.50% in 2000 to 35% in 2009. This is a direct result of the fact that dividends have been increasing much faster than earnings over the past decade.

Currently Aflac trades at a P/E of 12.60, yields 2.40% and has an adequately covered dividend payment. I would be adding to my position on dips below $48.

Full Disclosure: Long AFL

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- Financial Stocks for Dividend Investors

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1 comment:

  1. Good research, It's not easy to find a company with such a tremendous dividend increase!
    Thank you.


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