Aflac’s (AFL, Financial) dividend was increased by a modest 5% last week.
Aflac was incorporated on April 27, 1973, and provides supplemental health and life insurance. Its products are marked under the Aflac acronym and administered through the subsidiary, American Family Life Assurance Company of Columbus. Aflac offers these supplemental insurance policies primarily in Japan and the U.S.
Aflac has paid dividends consecutively for 34 years, making the firm a dividend aristocrat. The insurance company also released financial results at the same time as the announcement of the dividend increase. For the third quarter, revenue rose by a solid 13% on a year-over-year basis to $5.72 billion.
The firm’s business in Japan continued to perform well with revenue rising by nearly 19%. This was slightly under analysts' estimates. On the positive side of the ledger, Aflac increased its earnings per share (EPS) guidance to a range of $6.40 to $6.60. This is 20 cents higher than the previous median estimate.
The quarterly dividend for the December payment will be 43 cents per share versus the prior-year rate of 41 cents per share. The overall yield is 2.51%, above that of the Standard & Poor's 500. It currently ranks 14th out of large-cap insurance firms paying a dividend of over 1%.
Aflac is a solid company with modest dividend growth. However, last year Standard & Poor’s Ratings Services dropped its long-term financial strength rating on Aflac's core operating companies to A+ from AA-. And its junior subordinated debt is now rated BBB from BBB+ though the outlook is stable. The firm does not qualify as a member of our Top 100 Dividend Stock List (see below).
Aflac sold for $68.87 per share at market close Monday.
The new dividend of 43 cents will be paid on Dec. 1 to shareholders of record at close of business on Nov. 16. Listed in the table below are the quarterly dividend payments since 2010.
| Date | Quarterly dividend |
| Nov. 16 | 43 cents |
| Aug. 22 | 41 cents |
| May 16 | 41 cents |
| Feb. 11 | 41 cents |
| Nov. 16, 2015 | 41 cents |
| Aug. 17, 2015 | 39 cents |
| May 18, 2015 | 39Â cents |
| Feb. 12, 2015 | 39Â cents |
| Nov. 17, 2014 | 39Â cents |
| Aug. 18, 2014 | 37Â cents |
| May 19, 2014 | 37Â cents |
| Feb. 12, 2014 | 37Â cents |
| Nov. 18, 2013 | 37Â cents |
| Aug. 19, 2013 | 35Â cents |
| May 20, 2013 | 35Â cents |
| Feb. 13, 2013 | 35Â cents |
| Nov. 9, 2012 | 35Â cents |
| Aug. 13, 2012 | 33Â cents |
| May 14, 2012 | 33Â cents |
| Feb. 13, 2012 | 33Â cents |
| Nov. 14, 2011 | 33Â cents |
| Aug. 15, 2011 | 30Â cents |
| May 16, 2011 | 30Â cents |
| Feb. 11, 2011 | 30Â cents |
| Nov. 15, 2010 | 30Â cents |
| Aug. 16, 2010 | 28Â cents |
| May 17, 2010 | 28Â cents |
| Feb. 11, 2010 | 28Â cents |
Analysis of Aflac is based upon our five key criteria for the Top 100 list, which include:
| Category | Value | Score |
| Dividend Yield | 2.51% | 215 |
| Dividend Growth (3- to 6-year average) | 5.9% | 292 |
| Forward P/E | 9.91 | 24 |
| S&P Financial Rating | A+ | 80 |
| Beta | 1.10 | 110 |
| Total Score | Â | 721 |
Additional information
| % Yield | 3 Year Div. Growth Rate | 6 Year Div. Growth Rate | BV 2016 | P/BV Ratio | 10 yr P/BV Low | 10 yr P/BV High | 5 yr max Yield % | 5 yr lowest Yield % |
| 2.51% | 5.3% | 6.5% | 57.5 | 1.19 | 0.60 | 3.83 | 3.32% | 2.11% |
Final analysis
Positives
- Aflac is trading at a low forward price-earnings (P/E) ratio, well below the market. Additionally, it’s also trading below its average historical price-book (P/B) value ratio. From a relative valuation perspective, Aflac is undervalued.
- Aflac’s dividend yield is above that of the S&P 500 Index.
- Aflac maintains a three-year dividend growth rate of 5.3%.
- Aflac has paid out a dividend consecutively for the past 34 years.
Negatives
- Aflac’s credit rating has been recently downgraded.
- Aflac maintains a beta of 1.10, higher than the average company.
- Aflac’s current dividend yield (2.51%) is below its five-year average historical dividend yield of 2.72% and well off its maximum yield of 3.32% from July 2012.
Aflac does not qualify as one of our Top 100 Dividend Stocks due to its recent credit rating downgrade, modest dividend enhancements and a higher than average beta. Aflac’s insurance industry competitors Prudential (PRU, Financial), Chubb (CB, Financial), Principal (PFG, Financial), Travelers (TRV, Financial) and MetLife (MET, Financial) all rate higher (total score example) and are listed within the Top 100.
Disclosure: I have no position in Aflac.
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