A detailed quantitative analysis by AFLAC Incorporated (AFL) is linked here. Below are some highlights from the analysis linked above:
Company description: Aflac Incorporated offers supplemental health and life insurance in Japan and the United States. Products are marketed in the workplace and help fill gaps in primary insurance.
Fair value: When calculating the fair value, I take into account the differential fair value of the present value MMA along with these four fair value calculations. A detailed description can be found on page 2 of the linked PDF:
1. Avg. High yield price
2. 20-year DCF award
3. Avg. P / E price
4. Graham Number
AFL trades at a discount of 3.) and 4.) above. If the NPV MMA differential is also taken into account, the stock is trading at a discount of 10.1% on the calculated fair value of USD 59.43. AFL has earned a star in this area as it is traded at fair value.
Dividend analytical data: There are three possible stars and three key metrics in this section. A detailed description can be found on page 2 of the linked PDF:
1. Free cash flow payout
2. Debt to total capital
3. Key Metrics
4. Dividend Growth Rate
5th years Div. growth
6. Rolling 4 year old Div. > 15%
AFL received three stars in this section for 1.), 2.) and 3.) above. A star was earned because the free cash flow payout ratio was less than 60% and there were no negative free cash flows in the last 10 years. The stock earned a star because its recent debt to total capital was less than 45%. AFL received a star for an acceptable score on at least two of the four key metrics measured. The company has paid a cash dividend to shareholders every year since 1973 and has increased its dividend payments for 39 consecutive years.
Dividend Income vs. MMA: Why would you take the equity risk and invest in a dividend stock when you could get a better return on a much less risky money market account (MMA) or a government bond? This section compares that stock’s earning power to a High performance MMA. There are two points covered in this section. A detailed description can be found on page 2 of the linked PDF:
1. NPV MMA Diff.
2. years to> MMA
AFL received a star in this area for its NPV MMA Diff. from $ 798. That amount exceeds my target of $ 500 for a stock that has increased dividends as long as AFL has done so. If AFL increases its dividend to 7.9% per year, it will take 2 years to reach an MMA at an estimated 20-year average rate of 2.74%. AFL received a check for the Years To> MMA key metric because its 2 years are below the 5 year target.
Peers: The company’s peer group includes: Principal Financial Group Inc. (PFG) with a yield of 3.6%, Unum Group (UNM) with a yield of 4.0% and CNO Financial Group, Inc. (CNO) with a yield of 1.9%.
Conclusion: AFL received one star in the Fair Value category, three stars in the Dividend Analytical Data category and one star in the Dividend Income vs. MMA category for a total of five stars. This ranks AFL quantitatively as 5-star very strong Warehouse.
With my D4L-PreScreen.xls Model, I found that the stock price would have to rise to $ 63.29 before AFL’s NPV MMA differential rose to the minimum of $ 500 that I’m looking for on a stock with 39 years of consecutive dividend increases. At that price, the stock would yield 2.1%.
Resetting the D4L-PreScreen.xls The dividend growth rate model and solution required to generate the targeted MMA differential of $ 500. The calculated rate is 7.9%. This dividend growth rate is higher than the 6.3% used in this analysis, so there is no margin of safety. AFL has one Risk assessment of 1.25, which it classifies as a low risk stock.
AFL operates in the two largest insurance markets in the world (USA and Japan) and has built up an extremely cost-effective distribution system. AFL focuses on supplementary insurance products and consistently generates excess returns for shareholders. The steady result allowed the company to increase its dividend and buy back shares. AFL is currently trading at a discount to my calculated fair value price of $ 59.43. With a low free cash flow payout of 16% (versus 15%) and low total capital debt of 19% (versus 20%), AFL is one that I watch for future additions.
Disclaimer: The material presented here is for informational purposes only. The above quantitative stock analysis, including star rating, is mechanically calculated and based on historical information. The analysis assumes that the share will develop in the future as it has in the past. In general, this is never true. Before buying or selling stocks you should do your own research and arrive at your own conclusion. Please see my disclaimer for more information.
Full disclosure: At the time of this writing, I was long in AFL (1.9% of my dividend growth portfolio).
On the subject of matching items:
– Analysis of 3M Co. (MMM) dividend stocks
– Dividend stock analysis by Automatic Data Processing Inc. (ADP)
– Analysis of Nucor Corporation (NUE) dividend stocks
– Analysis of the dividend stocks of Walgreens Boots Alliance, Inc. (WBA)
– Air Products and Chemicals Inc. (APD) dividend stock analysis
– More stock analysis
Tags: AFL, PFG, UNM, CNO,