Linked here is a detailed quantitative analysis of Aflac Incorporated (AFL). Below are some highlights from the above linked analysis:
Company Description: Aflac Incorporated engages in the marketing and sale of supplemental health and life insurance plans in the United States and Japan.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
- Avg. High Yield Price
- 20-Year DCF Price
- Avg. P/E Price
- Graham Number
Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:
- Free Cash Flow Payout
- Debt To Total Capital
- Key Metrics
- Dividend Growth Rate
- Years of Div. Growth
- Rolling 4-yr Div. > 15%
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:
- NPV MMA Diff.
- Years to > MMA
Other: AFL is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index.
Conclusion: AFL did not earn any Stars in the Fair Value section, earned three Stars in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a total of four Stars. This quantitatively ranks AFL as a 4 Star-Buy.
Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $97.73 before AFL's NPV MMA Differential decreased to the $800 minimum that I look for in a stock with 27 years of consecutive dividend increases. At that price the stock would yield 1.15%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $800 NPV MMA Differential, the calculated rate is 9.5%. This dividend growth rate is significantly less than the 16.7% used in this analysis, thus providing a margin of safety. AFL has a risk rating of 1.25 which classifies it as a low risk stock.
Operating in the the U.S. and Japan, two largest insurance markets in the world, AFL has built a tremendous low-cost distribution system. AFL has long been one of my favorite financial stocks. Its debt and cash flow positions are excellent. With revenues, cash flow and dividends rising, AFL is an attractive company. However, it is currently trading at a 10% to my buy price of $40.01. Before adding to my position, I will wait for its price to drop closer to my buy price. For additional information, including the stock's dividend history, please refer to its data page.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I was long in AFL (1.7% of my Income Portfolio). What are your thoughts on AFL?