Be Sure To Check Out Aflac Incorporated (NYSE:AFL) Before It Goes Ex-Dividend

Aflac Incorporated (NYSE:AFL) is about to trade ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Aflac's shares on or after the 20th of February will not receive the dividend, which will be paid on the 1st of March.

The company's next dividend payment will be US$0.50 per share, on the back of last year when the company paid a total of US$2.00 to shareholders. Last year's total dividend payments show that Aflac has a trailing yield of 2.5% on the current share price of US$78.92. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Aflac

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Aflac paid out just 21% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Aflac's earnings per share have been growing at 16% a year for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Aflac has lifted its dividend by approximately 11% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Is Aflac worth buying for its dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. In summary, Aflac appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

While it's tempting to invest in Aflac for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 1 warning sign for Aflac and you should be aware of it before buying any shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.