Last update on 2024-06-27

Aflac (AFL) - Dividend Analysis (Final Score: 8/8)

Aflac (AFL) achieves an 8/8 score in dividend analysis, showcasing strong dividend stability and performance. Explore key metrics and growth trends in this comprehensive review.

Short Analysis - Dividend Score: 8

We're running Aflac (AFL) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The dividend analysis of Aflac (AFL) rates its performance and stability based on eight key criteria. Aflac scored exceptionally well, receiving an 8 out of 8. First, Aflac's dividend yield of 2.0364% is higher than the industry average, indicating solid returns for investors. The company's average annual dividend growth rate over 20 years is an impressive 14.125%, well above the 5% benchmark, showcasing robust growth. With an average payout ratio of just 23.09%, well below the 65% threshold, Aflac ensures dividends are sustainably covered by earnings. The payout ratio remains consistently low, around 21% in 2023, demonstrating financial prudence. Dividends are also well covered by cash flow, with an increasing yet manageable payout ratio rising from 4.3% to 30.3%. Stability is showcased with dividends increasing from $0.15 per share in 2003 to $1.68 in 2023, without any 20% drops. Aflac has paid dividends consistently for over 26 years, reflecting its stability and commitment. Finally, Aflac's reliable stock repurchases, reducing shares from 1,044.3 million in 2003 to 596.2 million in 2023, further affirm its strong financial health.

Insights for Value Investors Seeking Stable Income

Based on this comprehensive analysis, Aflac (AFL) appears to be a very strong dividend stock. It not only meets but exceeds industry standards in many areas, which makes it an appealing choice for dividend-focused investors. The consistent growth, low payout ratios, and strong commitment to shareholder returns via dividends and stock repurchases indicate a robust and stable financial outlook. Therefore, it is highly recommended for dividend investors to consider Aflac as a viable option in their portfolios.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield refers to the dividend income investors receive relative to the share price. A higher yield generally indicates a better return on investment, assuming dividend sustainability.

Aflac's dividend yield of 2.0364% surpasses the industry average of 1.73%, which suggests that Aflac is offering higher returns through dividends compared to its peers. Examining data over the past two decades, Aflac’s dividend yield has consistently been above 2% over the recent years, indicating stability and a commitment to returning value to shareholders. The stock price reached $82.50 in 2023, a considerable increase from $18.09 in 2003, reflecting overall growth. Furthermore, the dividends per share rose from $0.15 in 2003 to $1.68 in 2023, showing robust dividend growth. This is a positive trend indicating Aflac’s ability to generate and distribute increasing amounts to its shareholders.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate measures the annualized percentage rate of growth that a stock's dividend undergoes over a period of time, typically a long-term period like 20 years. A growth rate higher than 5% indicates a robust and growing dividend payout, which is an appealing trait for dividend growth investors because it suggests that the company is not only committed to returning capital to shareholders but is also thriving enough to continually enhance its payouts.

Analyzing Aflac's (AFL) historical dividend growth rates over the past 20 years reveals a mixed pattern. Specifically, the dividend per share ratio has experienced considerable fluctuations. For instance, in some years like 2007 and 2021, the dividend growth exceeded 45%, while in other years such as 2019 and 2020, the growth was merely around 3-4%. Despite these fluctuations, the average dividend growth rate stands at 14.125%, which is significantly higher than the 5% benchmark. This average indicates a strong overall growth trajectory, even though there are periods of slower growth. This trend is broadly positive for long-term investors seeking growing dividend income, as it underscores Aflac's overall capability to enhance shareholder returns over extended periods, despite occasional volatility in year-on-year dividend growth rates.

Average annual Payout Ratio lower than 65% in the last 20 years?

The payout ratio measures the proportion of earnings a company pays to its shareholders in the form of dividends. This indicates the sustainability of dividends.

Aflac (AFL) has demonstrated an average payout ratio of 23.09% over the last 20 years, which is substantially lower than the threshold of 65%. This signifies a conservative approach, reflecting the company's capacity to sustain its dividends even during varying economic conditions. This trend is favorable as it indicates that Aflac maintains a substantial portion of its earnings to fund its operations, invest in growth, and buffer against financial hardships, thereby ensuring shareholder returns are not compromised.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings. This criterion ensures that the company generates sufficient earnings to pay dividends without compromising its financial stability. A payout ratio (dividend per share divided by earnings per share) of less than 70% is generally considered sustainable.

Analyzing the provided data for Aflac (AFL), from 2003 to 2023, the payout ratio consistently remains below 70%. Specifically, it ranges from around 15% to a high of approximately 37% in 2008. The lower the percentage, the more comfortably the company's earnings can cover its dividends. For instance, in 2023, the payout ratio is around 21%, which implies that only 21% of the earnings are used for dividends, leaving substantial room for reinvestment or other financial activities. Such low payout ratios over the years indicate a very strong and sustainable dividend policy, suggesting a good trend for dividend investors. Moreover, the continuously growing earnings per share combined with controlled dividend growth showcases financial prudence.

Dividends Well Covered by Cash Flow?

A company's dividends should be well covered by its free cash flow to ensure financial stability. Too high a payout relative to cash flow could indicate potential risks.

For Aflac (AFL), over the period 2003 to 2023, we observe an increase in the percentage of free cash flow allocated toward dividend payouts. Specifically, this percentage has risen from around 4.3% in 2003 to approximately 30.3% in 2023. This long-term trend suggests that the dividends have remained well-covered, but there is a noticeable climb in payout ratios, especially in recent years. Historically, maintaining a dividend payout ratio below 70% is considered safe and sustainable. With Aflac's ratio remaining consistently well below this threshold, it indicates that the company's dividends are in a comfortable position relative to its free cash flow. This trend can be seen as positive, reflecting both the company's robust cash flow management and its ability to reward shareholders without compromising financial stability.

Stable Dividends Since the Company Began Paying Dividends?

Dividend stability over the last 20 years ensures that the company can provide reliable income, which is essential for income-focused investors.

The dataset indicates a continuous increase in dividends from $0.15 per share in 2003 to $1.68 per share in 2023. At no point over the past 20 years did Aflac's dividend per share drop by 20%. This trend signifies strong dividend stability, reflecting positively on the company's financial health and its commitment to returning value to shareholders. Such consistency is an excellent sign for income-seeking investors, asserting confidence in the predictability of future payments.

Dividends Paid for Over 25 Years?

Evaluating whether a company has consistently paid dividends for over 25 years shows its financial stability and commitment to returning value to shareholders.

Aflac (AFL) has paid dividends regularly for at least 26 years, as the data from 1998 to 2023 shows. In 1998, the dividend per share was $0.0631, and by 2023, it had increased steadily to $1.68. This consistent payment and growth in dividends is a strong indicator of Aflac's financial health, stability, and commitment to rewarding shareholders. This long-term trend is highly favorable and shows resilience through various market conditions.

Reliable Stock Repurchases Over the Past 20 Years?

Stock repurchases refer to the buyback of shares that the company had previously issued. They are important as they reduce the number of shares outstanding, which can boost earnings per share and often lift the stock price.

Aflac (AFL) has shown a consistent trend of reducing their number of shares over the last 20 years, which is a favorable sign for investors. The number of shares decreased from 1,044.3 million in 2003 to 596.2 million in 2023, showing a clear trend of repurchasing annually. The average annual share repurchase rate is -2.744%, indicating a systematic and enduring strategy for buying back shares. This consistency in repurchasing shares reflects positively on Aflac's commitment to returning value to shareholders and maintaining a healthy earnings per share growth. Overall, the decreasing share count is a good indicator of Aflac’s reliability in executing its stock repurchase programs.