Important news for shareholders and potential investors in Aflac Incorporated (NYSE:AFL): The dividend payment of US$0.27 per share will be distributed to shareholders on 03 June 2019, and the stock will begin trading ex-dividend at an earlier date, 21 May 2019. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Aflac's latest financial data to analyse its dividend characteristics.
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5 checks you should do on a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has the amount of dividend per share grown over the past?
- Does earnings amply cover its dividend payments?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does Aflac fare?
The current trailing twelve-month payout ratio for the stock is 26%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 26% which, assuming the share price stays the same, leads to a dividend yield of around 2.2%. Moreover, EPS should increase to $4.33.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there is one thing that you want to be reliable in your life, it's dividend stocks and their constant income stream. 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.
In terms of its peers, Aflac generates a yield of 2.1%, which is on the low-side for Insurance stocks.
Taking into account the dividend metrics, Aflac ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three key factors you should look at:
- 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.