Aflac

[ChadR]

I am also expecting a > 10% increase. .04 is my guess too.

[Kerim]

I really hope you guys are right. This would seem to be the year for AFL to be a little more generous with the increase. The financial crisis is well in the past and the payout ratio leaves a lot of room to increase.

But.... if the earnings estimates are in the right ballpark, then they are looking at only a modest improvement over last year. 2012 saw a big increase in earnings over 2011, and we got an 8 percent raise. 2013 earnings look to be only a couple of percent better than 2012, so why would this be the year for a bigger increase? Moreover, with the share price going like gangbusters lately, I doubt they feel much pressure to make shareholders happy with a bigger dividend raise.

Anyway, I've been hoping for AFL to be more generous with the dividend for a while now, but they've been very content with raises in the 8-9 percent range. While I am hopeful that "this is the year," I'm not sure I see any reason to suggest it will be.

[hendi_alex]

They have a tiny POR of 19%, very modest debt level, and according to Yahoo have over $5 in cash. It would seem that they are in excellent position to continue with the 8%-9% rate of dividend increase if they choose to do so.

[TomK]

I'd also like to see AFL do a bigger raise than usual this year. I understand that in their line of business you might want to be conservative with the cash. But by my math, even if annual earnings stayed flat at around $6.20 from here on, AFL could raise the dividend by 15 percent every year and the payout ratio would not even get to 50 percent until the 2019/2020 time frame.

[fiveoh]

.02 raise... I'm pretty disappointed, looks like they are increasing the buyback program instead.

"For 2013, we initially expected share repurchase to be in the range of $400 to $600 million. We now anticipate purchasing $800 million of our shares this year. Previously, we had communicated 2014 share repurchase to be in the range of $600 to $900 million for the year. We now anticipate 2014 share repurchase in the range of $800 million to $1 billion."

Also "I am also pleased with the action by the board of directors to increase the quarterly cash dividend by 5.7%, effective with the fourth quarter of 2013. This marks the 31st consecutive year of increasing our cash dividend. Our objective is to grow the dividend at a rate generally in line with operating earnings before the impact of foreign currency translation. " So... since they are only estimating 2-5% growth for 2014 per this earnings report, it looks like we will be stuck with low div growth for a while.

[ChadR]

Ouch. Was expecting double that. I know that they haven't had the best year, but still was expecting more than 5.7% they did do. Their payout is low enough they could have done a lot more than .02.

[EricL]

Disappointed as well, but I suppose with the stock being undervalued it will benefit shareholders in the long run to increase the buyback.

[Kerim]

(10-29-2013, 03:31 PM)ChadR Wrote: Their payout is low enough they could have done a lot more than .02.

Completely agree. Hate to say I called this one....

I think Aflac is a great company, but growing the dividend quickly is clearly not a corporate priority, and investment must bear that in mind.

[fiveoh]

MARKET CURRENTS
real-time news and commentary for investors
Market Currents
Wednesday, Nov 13
5:13 PM
Aflac increases repurchase authorization by 40M shares, shares +1.1% AH

Aflac (AFL) nearly triples its share repurchase authorization, adding 40M shares to the remaining 16.9M shares under the prior authorization. If the new authorization is used in full, it would be good for reducing shares outstanding by 9.1%.
Aflac expects to repurchase $800M in shares in 2013 and $800M-$1B in 2014.

I would have preferred a larger div hike personally but this may be better since the shares appear to still be undervalued.

[Kerim]

(11-13-2013, 07:00 PM)fiveoh Wrote: I would have preferred a larger div hike personally but this may be better since the shares appear to still be undervalued.

That news is pretty hard to understand after such a stingy dividend increase. That said, AFL is still atop my list, and every week that it goes higher, I regret not pulling the trigger. Hmmm.

[NilesMike]

Seeking to learn. How is AFL considered undervalued when it's near it's all time high and dividend yield is near 5 year lows?

Seems topped out, at least short term and I would only be a buyer on a good down move.

Good luck to all.

[Kerim]

(11-16-2013, 10:36 AM)NilesMike Wrote: Seeking to learn. How is AFL considered undervalued when it's near it's all time high and dividend yield is near 5 year lows?

Seems topped out, at least short term and I would only be a buyer on a good down move.

Good luck to all.

Gotta run out for errands, but the short answer is that price alone tells you nothing about valuation. Yield is more helpful, but not a whole lot more. A stock that pays no dividend at all can be extremely undervalued.

There are many ways to value a stock, and I am only now learning the ins and outs of valuation deeper than simple p/e and the such. But at its heart, valuation is all about pricing the future potential of the company. The thesis with AFL is that the market is improperly discounting its future earnings, and that over time, that will correct, as reflected in a stock price that is higher relative to earnings and other metrics.