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Have you been keeping an eye on Aflac Incorporated’s (NYSE:AFL) upcoming dividend of US$0.27 per share payable on the 01 March 2019? Then you only have 2 days left before the stock starts trading ex-dividend on the 19 February 2019. What does this mean for current shareholders and potential investors? Below, I will explain how holding Aflac can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.
Here’s how I find good dividend stocks
When researching a dividend stock, I always follow the following screening criteria:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has it increased its dividend per share amount over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will it have the ability to keep paying its dividends going forward?
How does Aflac fare?
The company currently pays out 27% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Going forward, analysts expect AFL’s payout to remain around the same level at 26% of its earnings. Assuming a constant share price, this equates to a dividend yield of 2.3%. Moreover, EPS should increase to $4.15.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. AFL has increased its DPS from $0.56 to $1.08 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes AFL a true dividend rockstar.
Compared to its peers, Aflac has a yield of 2.2%, which is on the low-side for Insurance stocks.
Keeping in mind the dividend characteristics above, Aflac is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three relevant factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for AFL’s future growth? Take a look at our free research report of analyst consensus for AFL’s outlook.
- Valuation: What is AFL worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether AFL is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.