Linked here is a PDF copy of my detailed analysis of AFLAC Inc. (AFL). Below are some highlights from the above linked analysis:
Company Description: Aflac Incorporated engages in the marketing and sale of supplemental health and life insurance plans in the United States and Japan.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description: 1.) Avg. High Yield Price, 2.) 20-Year DCF Price, 3.) Avg. P/E Price and 4.) Graham Number. AFL doesn’t do very well in this section. It is trading at a discount to only one of the four valuations listed above. If I exclude the high and low valuation, and average the remaining two valuations, AFL is trading at a 8.4% premium. AFL has a Star deducted for trading at a premium in excess of 5%.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description: 1.) Rolling 4-yr Div. > 15%, 2.) Dividend Growth Rate, 3.) Years of Div. Growth, 4.) 1-Yr. > 5-Yr Growth and 5.) Payout 15% of avg. AFL earned Stars in all four categories [5.) is a deduct only, if failed]. AFL topped out in this section.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description: 1.) NPV MMA Diff. and 2.) Years to >MMA. As well as AFL performed in the previous section, it failed dismally in this section earning no Stars.
Other: The AFLAC duck is probably one of the most recognized icons currently used in advertising. My kids (12 and 10) absolutely love their commercials.
Conclusion: AFL lost one Star in the Fair Value section, added four Stars in the Dividend Analytical Data section and added no Stars in the Dividend Income vs. MMA section for a total of Three Stars which rates it as a 3-Star Hold. AFL is a great company and has all the dividend analytical attributes that I am looking for, but at its current price and dividend yield, I do not see it as a good value. I will wait for a better buying opportunity before adding to my current position.
Disclaimer: As always this is only my opinion and you should not rely on it. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I own shares of AFL.
What are your thoughts on AFL? Do your kids like the duck?
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