Every once in a while, Wall Street investors seem to go to sleep and miss a buying opportunity. This appears to be the case with AFLAC (NYSE:AFL), the worlds' largest underwriter of supplemental cancer medical insurance.
Share prices just hit a 52-week low of $44.10 on July 18; this is down from the 52-week high of $59.54 posted on March 1, 2011. Yesterday, July 19, it closed at $44.50. Since AFL derived 75% of revenues and 77% of 2010’s profits from Japan, investor concern over recent natural disasters within that island nation are without a doubt to blame for share prices having slumped. However, the Japanese are a resilient, industrious people, who will unquestionably bounce back in record time. And since AFL does not issue property damage insurance it does not face any unmanageable insurance losses.
That said, this stock has been a perennial performer for decades, rewarding its shareholders with annual dividend increases since 1983. The dividend is presently 30¢/Q, up from 28¢/Q in 2010. In 2005 it was paying 11¢/Q, in 2000, 4.25¢/Q, and in 1996, 2.5¢/Q. Going forward dividends should continue to increase at a double-digit rate, reaching 50¢/Q by 2015-6. AFL has historically paid dividends at between 20% and 25% of earnings.
Also, with the exception of 1981, 1989, and 2008, AFL posted record earnings every single year since 1980. Over the past 5 years AFL earned as follows: $3.27 in 2007, and $2.62/share in 2008 (one of its down years). It then bounced right back, earning $3.91 in 2009, and in 2010 earnings again took a leap to $5.13.
Consensus estimates by 20 analysts are looking for earnings of just over $6/share for 2011, and around $6.50 for 2012. Working up the PE numbers I find AFL with a trailing PE of 9.8, and a forward PE of 7.5 on 2011‘s projected earnings. And if it should perform as expected in 2012, that means at today’s price it is trading at a PE of just 6.9. The trailing 10-year average PE on AFL has been 16.5!
Officers and directors of the company own 3% of the 467.7 million outstanding shares and control 20.5% of the voting power. There are no funds presently holding 5% or more of the shares. When they wake up to the intrinsic value and historical earning power of AFL, they will probably increase their holdings.
Disclosure: I do not presently own AFL, nor do I have plans to buy it in the next 72 hours.