Aflac's (NYSE:AFL) Upcoming Dividend Will Be Larger Than Last Year's

Aflac Incorporated (NYSE:AFL) has announced that it will be increasing its dividend from last year's comparable payment on the 1st of June to $0.42. Based on this payment, the dividend yield for the company will be 2.5%, which is fairly typical for the industry.

See our latest analysis for Aflac

Aflac's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, Aflac's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to fall by 4.0% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 26%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Aflac Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.66 in 2013, and the most recent fiscal year payment was $1.68. This means that it has been growing its distributions at 9.8% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Aflac May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings per share has been crawling upwards at 3.6% per year. If Aflac is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Aflac Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Aflac that investors should take into consideration. Is Aflac not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.