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Aflac Incorporated (NYSE:AFL), through its subsidiary, American Family Life Assurance Company of Columbus (Aflac), provides supplemental health and life insurance. Aflac is a dividend aristocrat which has paid uninterrupted dividends on its common stock since 1973 and increased payments to common shareholders every year for 28 years.

The most recent dividend increase was in 2010, when the Board of Directors approved a 7.10% increase to 30 cents/share.

Over the past decade this dividend growth stock has delivered an annualized total return of 5.20% to its loyal shareholders.

The company has managed to deliver an increase in EPS of 16.20% per year since 2001. Analysts expect Aflac to earn $6.21 per share in 2011 and $6.45 per share in 2012. In comparison Aflac earned $4.95 /share the company earned in 2010.

The company would likely be able to generate high single digit revenue increases on new distribution channels in Japan as well as unveiling new products, which would satisfy insurance needs of its clients. The company’s number of agents in Japan rose in 2010 by almost 5 percent.

One of the biggest risks behind Aflac could be its bond portfolio, which has exposure to European financials as well as European sovereign debt. Another risk behind Aflac , albeit small, is that the earthquake in Japan could dampen growth in the near term. Aflac is offering its products in almost 90% of Banks in Japan, and more branches are expected to start pushing the products in the coming years. The real growth kick could be in the US, where a small portion of US businesses offer Aflac's policies. The fact that Aflac has built a strong brand in the US, based on the white duck, is another strong differentiator.

The company has been able to increase its return on equity from 13.60% in 2001 to 22% by 2010. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.

The annual dividend payment has increased by 21.30% per year over the past decade, which is much higher than the growth in EPS.

A 21% growth in distributions translates into the dividend payment doubling almost every three and a half years. If we look at historical data, going as far back as 1984, we see that Aflac has actually managed to double its dividend every four and a half years on average. Most recently however, dividend growth has waned to the high single digit percentage increases.

Over the past decade the dividend payout ratio has been on the increase, mostly due to the fact that dividend growth was higher than earnings growth. The ratio is low at 23%, so there is room for future dividend growth. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

Currently Aflac is trading at 10 times earnings, yields 2.70% and has a sustainable dividend payout. The stock is attractively valued per my entry criteria and I have recently added to my position on the dip below $48.

Disclosure: Long AFL
Source: Dividend Stock Analysis: Aflac