Dividend Aristocrats in Focus Part 12: AFLAC Incorporated (AFL)

AFLAC Incorporated (NYSE:AFL) has a long operating history, and is a giant in the insurance industry. Today, it provides insurance products to more than 50 million people worldwide.

But it wasn’t always so big…

In 1955, John Amos and his brothers Paul and Bill thought of an idea to sell insurance products that paid cash if a policyholder got sick or injured. At that time, workplace injuries that resulted in disability were common, yet no product existed to help remedy this.

In the 60 years since, Aflac has done an excellent job of creating value for shareholders. For example, in the past 10 years the company grew earnings by 8% compounded annually. This is very impressive when you consider that this period includes the Great Recession.

With its highly profitable business model and steady growth, Aflac is committed to returning cash to shareholders. It does this by repurchasing stock and also raising its dividend regularly.

Aflac is a Dividend Aristocrat and has increased its dividend for 33 years in a row.  You can see all 50 Dividend Aristocrats here (stocks with 25+ years of rising dividends in the S&P 500).  The Dividend Aristocrats Index has outperformed the S&P 500 significantly over the last decade…

Amazingly, Aflac has better total returns than the S&P 500 over the last decade as well.  The reason this is amazing is because Aflac’s price-to-earnings ratio fell from ~16 to ~11 and yet it still outperformed the market.

If the company’s price-to-earnings ratio stays constant (or better yet, increases), the company will likely significantly outperform over long periods of time.

This article examines the investment prospects of Aflac in detail.