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Aflac: Impressive Record, Mixed Results

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Few concepts are much enjoyable to deliberation astir than nan thought of passive income hitting one's slope account. This income usually takes activity connected nan beforehand end. Investing successful stocks aliases existent property takes capital, and extracurricular of a gift aliases an inheritance, it takes activity to build up those first dollars to invest.

However, erstwhile an individual aliases a family has immoderate capital, it's imaginable to deploy it toward passive income that comes from investments. Bonds and slope accounts salary interest. Real estate, erstwhile done correctly, brings successful rental payments. Stocks salary dividends. There are galore taxation benefits from existent property investments, but location tin besides beryllium headaches. Renters tin person nan proverbial leaky toilet astatine 2 a.m., and owners who don't person a spot head mightiness person to make a travel successful nan dormant of nighttime to hole it. I don't really find that hassle appealing.

That's why I for illustration dividend investing. I tin ain existent property without having to negociate it aliases moreover find a manager. All I request to do is bargain immoderate shares of a existent property finance trust. I tin besides ain first-rate companies that person nary relationship to existent property erstwhile I ain shares of their stock. I for illustration to acquisition companies aliases costs that salary retired dividends each 4th aliases each month.

As agelong arsenic nan companies I ain proceed to do well, they tin proceed paying retired dividends for nan foreseeable future. If they person nan expertise to summation their revenues and, much importantly, their income, they tin summation these dividends complete time. Some companies person accrued their dividends for decades. One of those companies is Aflac (NYSE:AFL). This supplemental security elephantine has grown its payout to shareholders for 40 years straight. This goes backmost to nan first word of nan Reagan presidency, and nan years since person seen a world financial situation and a world pandemic, not to mention panic attacks, governments tally wholly by some governmental parties, on pinch divided government.

Year aft year, nether each sorts of economical conditions, Aflac has delivered results for its shareholders. The pursuing floor plan tracks nan value activity of AFL complete nan past 30 years, and it shows that investors who person held it for nan entirety of this play saw nan worth of their shares summation to much than 30 times what it was. Accounting for splits, nan value of Aflac has accrued from $2.16 per stock successful February 1993 to its existent value of $69.32 (as of 3 p.m. connected February 17, 2023).

a floor plan that shows value appreciation of Aflac banal complete 30 years

30 years of Aflac Price Appreciation (Seeking Alpha)

In summation to nan value appreciation, nan dividend paid retired by AFL has grown impressively. When looking astatine nan company's investor relations page, 1 tin spot Aflac's dividend maturation history from 1992, erstwhile nan split-adjusted dividend was $0.01 per stock per quarter. Today, aft a caller increase, nan dividend sits astatine $0.42 per stock per quarter. Indeed, nan dividend payout has grown moreover faster than nan price.

Again, nan capacity of Aflac has been strong. However, caller results mightiness springiness investors a spot of region earlier entering a position astatine nan existent value level.

Recent Quarterly Results

The astir caller quarterly results did not show gross aliases income growth. Some of nan declines were owed to finance losses that were tied to overseas speech rates. Aflac is progressive chiefly successful nan American and Japanese markets, and nan second was wounded extensively by a overmuch weaker yen erstwhile compared to nan dollar. In nan 4th fourth of 2022, nan speech complaint was 141.87 yen to 1 dollar; successful nan aforesaid play a twelvemonth before, nan speech complaint was 113.70:1. Net earned premiums successful Japan were down much than 19% from nan erstwhile twelvemonth (the 4th fourth besides ended nan fiscal twelvemonth for Aflac), contempt an 11.4% summation successful caller annualized premium income successful nan Japanese market.

Sales successful nan US accrued by 16.1% complete nan past year, but nan nett earned premiums mightiness springiness investors a spot of pause. These really declined by 0.2% complete nan past year, and nan institution indicated that "lower persistency" was nan cause. In different words, capable policyholders allowed their policies to lapse to trim this number. Was this owed to inflation? If group are having much problem paying for necessities, supplemental security policies mightiness beryllium 1 of nan areas that group determine to trim backmost on. If ostentation continues and disposable income is stretched, this could measurement connected Aflac's capacity for a while. One 4th aliases 1 yearly study does not a inclination make, but it is important to watch this number complete nan agelong word to spot if it does bespeak a trend.

Overall, full gross for nan past 12 months came successful astatine $19.502 billion, which was a alteration of 11.8% complete nan erstwhile 12 months. Additionally, nett net dropped 2.9% to $4.201 billion. Again, 1 twelvemonth does not a inclination make, but nan gross number for 2022 was nan lowest Aflac has reported complete nan past 10 years.

Regarding nan dividend, AFL, arsenic noted above, has accrued its dividend for 40 successive years. It's often based on that nan safest dividend is nan 1 that's conscionable been raised. Aflac conscionable announced precocious past twelvemonth a 5% raise of $0.02 per stock per quarter. This brings nan quarterly payout to $0.42/share. While this is successful statement pinch increases from a fewer years ago, nan past 2 increases were nearer 15% to 20% (21.2% for 2022, to beryllium exact). Perhaps this shows that AFL is simply a spot little optimistic astir nan expertise to summation nan dividend arsenic rapidly. However, it should beryllium noted that according to Seeking Alpha, nan current dividend payout ratio is still rather debased astatine 30.08%.

The astir caller quarterly study noted different area successful which nan institution has been bully to shareholders complete nan past year. Indeed, complete nan past 10 years, AFL has been engaged successful nan believe of buying backmost shares aggressively. In that play of time, nan number of shares dropped from 929 cardinal to 634.8 million. In different words, location are astir 1/3 less shares connected nan marketplace coming than location were successful 2012. Aflac bought backmost 39.2 cardinal shares successful 2022 alone, and successful nan astir caller report, location are still 116.6 cardinal further shares authorized nether nan existent buyback programme arsenic of nan extremity of past year. That would return astir 1/5 of nan existent shares outstanding disconnected nan market, a move that will use net per share.

Conclusion

There is overmuch to for illustration astir Aflac. I person owned shares successful nan past, and I would for illustration to ain them again. The little gross successful nan past twelvemonth is astatine slightest partially owed to a fluctuating speech rate. The current PE ratio for nan banal (10.56 arsenic of February 17, 2023) is higher than it has been for astir of nan past 5 years. Shares were successful nan $50s for overmuch of nan past 2 aliases 3 years, and moreover spent astir of 2020 astatine aliases beneath nan $40 mark. The merchandise of nan astir caller quarterly study saw a spot of a driblet successful nan value initially, but obscurity adjacent nan prices disposable arsenic precocious arsenic October. If shares driblet astir nan $60 people aliases lower, I would beryllium absorbing successful buying shares. At nan existent price, I would clasp if I owned nan stock. (For afloat disclosure, I owned shares until August. I sold to free up rate because of a move and nan acquisition of a caller home, not because of immoderate awesome interest successful holding shares of Aflac for nan agelong run.)

This article was written by

Christopher Price floor plan picture

Chris is simply a history coach astatine a organization college. He is building a dividend-paying banal portfolio that is hopefully debased connected nan consequence standard to build up income for his aureate years.

Disclosure: I/we person nary stock, action aliases akin derivative position successful immoderate of nan companies mentioned, and nary plans to initiate immoderate specified positions wrong nan adjacent 72 hours. I wrote this article myself, and it expresses my ain opinions. I americium not receiving compensation for it (other than from Seeking Alpha). I person nary business narration pinch immoderate institution whose banal is mentioned successful this article.

Additional disclosure: I americium not an finance professional. The preceding is intended for informational and acquisition purposes. Please make judge to execute owed diligence earlier investing successful equities, arsenic losses up to each superior invested tin occur.

Editor: Naga



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