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Where would you value Aflac right now?
I know the P/E looks quite attractive, but it is trading at its 52 week high.
Buying a stock at its 52 week high gives me bad memories of when I started my Qualcomm position a couple yrs ago just before the China troubles surfaced, and it dropped off a cliff after I purchased shares...
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It is at a 52 week high, but it's still trading at just under 10x fwd earnings. They are a solid company, sitting on six years worth of dividend payments in cash.
Also, on a side note, they have a great track record of underwriting profit, which is uncommon among insurance companies. http://seekingalpha.com/article/1032911-...e-of-value
It appears that the market is afraid of AFL's exposure to Japan. However, it's dividend is incredibly safe:
33 Years of rising dividends
25% payout ratio
Very little debt and a lot of cash on hand
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The fundamentals of AFL always look pretty compelling to me, but then year after year after year, they give us uninspiring dividend raises and we never see any expansion of the valuation. I hold some, and think it is an excellent and conservatively-run company, but it is hard for me to get excited about buying more shares. I'd probably need an even bigger bargain than usual to load up more.
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(04-20-2016, 10:59 AM)benjamen Wrote: It appears that the market is afraid of AFL's exposure to Japan.
This has been the case for many years, but I've found the company to be very safe. They've been derisking from Japan for a few years now.
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04-20-2016, 05:23 PM
(This post was last modified: 04-20-2016, 05:24 PM by Dividend Watcher.)
(04-20-2016, 11:00 AM)Kerim Wrote: The fundamentals of AFL always look pretty compelling to me, but then year after year after year, they give us uninspiring dividend raises and we never see any expansion of the valuation. I hold some, and think it is an excellent and conservatively-run company, but it is hard for me to get excited about buying more shares. I'd probably need an even bigger bargain than usual to load up more.
Kerim brings up some good points.
As to the stock, obviously Kerim is looking more for total return whereas I am very comfortable that steady, "uninspiring" dividend growth rate of 5-7% year in and year out. It's circling around my long-term goal of 6% dividend income growth every year to beat inflation over the long term. I'm guessing their days of low-teens dividend increases are behind it. AFL is a bigger company now, Japan's birth rate has dropped considerably contributing to the rapid aging of their population and they still face headwinds of repatriating Yen back to the U.S. with the tax rates as they are. Because of those reasons, I'm guessing that a P/E of around 11-12 is a justified level and it's not going to undergo a huge margin expansion for a while.
Even better, for me, is that the price has been bouncing around in a trading range of $55 to $65 for the last few years. For me, it can do that as long as it wants as I keep reinvesting the dividends. These 52 week new highs are breaking out to the high side of the range which bugs me a little and would be glad if it pulled back to the low 60s. The only sticking point for me is the lower initial yield of around 2.5%. However, another 10 years of reinvesting and steady increases to the dividend would be a nice cornerstone to my dividend income stream.
The company itself is facing some headwinds which I mentioned above. So far, management has been pretty adept at handling it. Debt/Equity is still only around 35%. They have almost as much cash on hand as their total debt so they have breathing room there. I mentioned it elsewhere that their U.S. sales force has been more aggressive both with individual policies and with very small businesses. I don't think AFL is going to wind up going broke or cutting the dividend.
So, is AFL going to make you fabulously rich in a short period of time? No, I doubt it. Would I buy it here? No, I'd wait till it pulled back to the low 60s (at least) but a case could be made for opening small position here if you have a few years. Valuation is much better than a lot of the other blue chips at this stage of the market and economy.
Just my thoughts.
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“While the dividend itself is merely a rearrangement of equity, over time it's more like owning an apple tree. The tree grows the apples back again and again and again, and the theoretical value of the tree doesn't change just because of when the apples are about to fall.” - earthtodan
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I'm with Kerim, and DW brings up some good points.
I'm spoiled having bought most of my AFL during Fukushima and also when there was this meme that their portfolios were full of European bonds when everyone thought Europe and Greece would explode into a giant fireball.
Quite disappointed with these low raises the past few years, but at this point, I'd prefer a more prudent management that one too aggressive...But yeah, hard for me to pull the trigger here.
But a high quality company. I keep hoping that one year management will announce a mid teens dividend raise, justifying the slower years. One does need to be patient in this business.
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(04-20-2016, 11:03 PM)Dividendsrule Wrote: I'm with Kerim, and DW brings up some good points.
I'm spoiled having bought most of my AFL during Fukushima and also when there was this meme that their portfolios were full of European bonds when everyone thought Europe and Greece would explode into a giant fireball.
Quite disappointed with these low raises the past few years, but at this point, I'd prefer a more prudent management that one too aggressive...But yeah, hard for me to pull the trigger here.
But a high quality company. I keep hoping that one year management will announce a mid teens dividend raise, justifying the slower years. One does need to be patient in this business.
These are all great points, definitely things to consider. I've had AFL and reinvested for so many years that my cost basis is so low. I'm happy with 6% dividend increases. I think they are conservatively run. It helps to consider AFL as two separate businesses, the Japanese business and rest of world. For gaap reporting, yen gets translated back to USD, which looks bad on paper. However, that's not representative of their actual business, which grows steadily if you back out the fx impact.
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Thanks all for the replies. I did some buys today, but couldn't pull the trigger yet on AFL. I'll keep watching it as I have been, hoping for a lower price.
Once bitten twice shy, with it being so close to the 52 week high, even though it did have a small dip today.
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(04-21-2016, 06:45 PM)kh137 Wrote: Thanks all for the replies. I did some buys today, but couldn't pull the trigger yet on AFL. I'll keep watching it as I have been, hoping for a lower price.
Once bitten twice shy, with it being so close to the 52 week high, even though it did have a small dip today.
Nothing wrong with waiting for lower prices.
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Looks like you'll be waiting a little longer after today's report:
Quote:Q1 EPS of $1.73 beats by $0.10.
Revenue of $5.45B (+4.2% Y/Y) beats by $190M
Price acted accordingly.
Another forehead slap for me. 
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“While the dividend itself is merely a rearrangement of equity, over time it's more like owning an apple tree. The tree grows the apples back again and again and again, and the theoretical value of the tree doesn't change just because of when the apples are about to fall.” - earthtodan
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(04-27-2016, 07:21 PM)Dividend Watcher Wrote: Looks like you'll be waiting a little longer after today's report:
Quote:Q1 EPS of $1.73 beats by $0.10.
Revenue of $5.45B (+4.2% Y/Y) beats by $190M
Price acted accordingly.
Another forehead slap for me.
Indeed, it will stay on my watch list for the time being...
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