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How Should Investors React To Aflac Incorporated’s (NYSE:AFL) CEO Pay?

Alex Johannesen

Dan Amos became the CEO of Aflac Incorporated (NYSE:AFL) in 1990. This analysis aims first to contrast CEO compensation with other large companies. Then we’ll look at a snap shot of the business growth. And finally – as a second measure of performance – we will look at the returns shareholders have received over the last few years. This method should give us information to assess how appropriately the company pays the CEO.

See our latest analysis for Aflac

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How Does Dan Amos’s Compensation Compare With Similar Sized Companies?

At the time of writing our data says that Aflac Incorporated has a market cap of US$34b, and is paying total annual CEO compensation of US$23m. (This is based on the year to 2017). While we always look at total compensation first, we note that the salary component is less, at US$1.4m. We looked at a group of companies with market capitalizations over US$8.0b and the median CEO compensation was US$11m. (We took a wide range because the CEOs of massive companies tend to be paid similar amounts – even though some are quite a bit bigger than others).

As you can see, Dan Amos is paid more than the median CEO pay at large companies, in the same market. However, this does not necessarily mean Aflac Incorporated is paying too much. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

The graphic below shows how CEO compensation at Aflac has changed from year to year.

NYSE:AFL CEO Compensation January 16th 19

Is Aflac Incorporated Growing?

Over the last three years Aflac Incorporated has grown its earnings per share (EPS) by an average of 32% per year (using a line of best fit). Revenue was pretty flat on last year.

This shows that the company has improved itself over the last few years. Good news for shareholders. It’s also good to see modest revenue growth, suggesting the underlying business is healthy.

You might want to check this free visual report on analyst forecasts for future earnings.

Has Aflac Incorporated Been A Good Investment?

Boasting a total shareholder return of 74% over three years, Aflac Incorporated has done well by shareholders. This strong performance might mean some shareholders don’t mind if the CEO were to be paid more than is normal for a company of its size.

In Summary…

We compared total CEO remuneration at Aflac Incorporated with the amount paid at other large companies. Our data suggests that it pays above the median CEO pay within that group.

Importantly, though, the company has impressed with its earnings per share growth, over three years. Even better, returns to shareholders have been plentiful, over the same time period. So, considering this good performance, the CEO compensation may be quite appropriate. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Aflac (free visualization of insider trades).

Or you could feast your eyes on this interactive graph depicting past earnings, cash flow and revenue.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.