Dividend Aristocrat Overview: Aflac, Inc.

About Aflac

The "Aflac Duck" has become the face of the insurer.  Aflac began growing its dividend in 1983. Photo courtesy www.homejobsbymom.com/flickr.com.

The “Aflac Duck” has become the face of the insurer. Aflac began growing its dividend in 1983.
Photo courtesy www.homejobsbymom.com/flickr.com.

Aflac is the #1 provider of guaranteed renewable insurance in the U.S. and the #1 insurer in Japan, and started as the American Family Life Assurance Company of Columbus in 1955.  The company is well known for the “Aflac Duck”, which was introduced in 2000 and is a prominent part of the company’s branding strategy.  Aflac employs more than 4,500 people.  In addition, more than 74,000 independent sales agents represent Aflac.

The company’s business is focused in the United States and in Japan.  Aflac has been licensed to operate in Japan since 1974 and the company insures 1 in 4 households in Japan.  Aflac Japan is represented by over 120,000 licensed sales associates.

Aflac generated $23.9 billion in revenues in 2013, down 5.6% from $25.4 billion in 2012.  Income is split into two categories: investment income (i.e., return on Aflac’s investments) and premium income (i.e., payments by Aflac’s customers).  In 2013, investment income was $3.3 billion, which was down 5.2% from the 2012 figures, and the premium income was $20.1 billion, down 9.1% from 2012.  In its annual report, the company blamed the Yen/Dollar exchange rate, which was down 18.2% year-over-year.

Aflac paid out $13.8 billion in benefits and claims in 2013, which was down from $15.3 billion – by 9.8% – in 2012.

The company is a member of the S&P 500 index and a Fortune 500 company, and trades under the ticker symbol AFL.

Aflac’s Dividend and Stock Split History

Aflac has increased dividends annually since 1983 and met the Dividend Aristocrat criteria of 25 straight years of increasing regular dividend payments in 2007.  Since 2010, the company has announced dividend increases in late October and pays the increased dividend in early December.  You should plan on owning the stock no later than mid-November to capture the first payment of the increased dividend.

Aflac has a 5-year compounded dividend growth rate of 8.14%.

Aflac has grown its dividend over the last 5 years at a compounded rate of 8.14%.  Data from Aflac investor relations website and annual reports.

Following at least 15 years of dividend increases exceeding 13% a year, Aflac has slowed the rate of dividend growth recently.  Since 2010, the company has increased the annual dividend by single digit percentages, resulting in a 5-year compounded annual dividend growth rate (CADGR) of 8.14%.  However, with those large dividend increases early on, Aflac has a 10-year CADGR of 16.82%.

Aflac has paid out stock dividends many times since being listed on the NYSE in 1974.  The company paid a 25% stock dividend (that is, the company paid you 1 additional share for each 4 shares already owned) in October 1976, 10% stock dividends in March 1978 and September 1979, a 20% stock dividend in December 1983, another 10% stock dividend in December 1984, a 50% stock dividend in June 1985, a 33% stock dividend in March 1986, a 100% stock dividend in February 1987, a 25% stock dividend in 1993, and 50% stock dividend in March 1996, and, finally, 100% stock dividends in June 1998 and March 2001.

Aflac has grown slowly since becoming a Dividend Aristocrat in mid-2007.  Since that time, Aflac has grown at a compounded rate of 4.5% when ignoring reinvested dividends.  This slightly beats the 3.8% compounded rate of return of the S&P 500 during that time.

Direct Purchase and Dividend Reinvestment Plans

Aflac has both direct purchase and dividend reinvestment plans.  The terms and fees of Aflac’s plans are very friendly to investors, as the company pays all administration costs for the plans.  Aflac also pays the commissions when you buy shares of stock whether through dividend reinvestments or directly.  However, when you sell your stock through the plan, you will pay a sales commission.

Aflac administers the plan directly; additional information and the enrollment form is available on its website.

Helpful Links

Aflac’s Investor Relations Website

Current quote and financial summary for Aflac (finviz.com)

Information on the direct purchase and dividend reinvestment plans for Aflac

Want to find out about more great dividend growth stocks?

Check out the list of current S&P Dividend Aristocrats.