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Aflac: A Dividend Champion Gift For The Patient Investor

Mar. 11, 2020 5:23 AM ETAflac Incorporated (AFL)17 Comments
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Wealth Insights


  • Aflac's stock has been bruised and battered by plummeting interest rates and treasury yields.
  • Aflac has a long history of growing its dividend in a variety of economic environments. The conservative nature in which Aflac is run gives us reassurance of a safe dividend.
  • The stock is attractively valued, giving investors long-term upside for when rates and yields eventually move higher again.

Supplemental insurance provider and dividend champion Aflac Incorporated (NYSE:AFL) has been hit especially hard by the recent sell-off in the overall stock market. The price of shares has contracted a whopping 30% in just the last month. This movement has presented a buying opportunity in our view. The company remains stable financially, and insurance is a product/service that will see continued demand over the long term. The stock's valuation now represents a deep discount to historical norms. Investors need to heed caution as interest rates continue to drop (reducing profitability of financial institutions and insurance companies), but long-term upside will be realized as rates eventually rebound in the years ahead.

Note: This article is an update on Aflac's dividend and valuation. A complete profile of the company can be found HERE.

Dramatic Negative Price Movement

As we can see, shares had remained relatively neutral for most of the past six months. However, the negative market movement of the past few weeks has drastically impacted shares, pushing the stock to dramatic, new 52-week lows of just over $36 per share. The stock currently trades in that neighborhood at just over $37 per share. The movement represents a rough 30% decline in just a few weeks.

source: Ycharts

Why Has The Stock Declined?

Aside from the obvious downward pressure of the broader market, Aflac has been pressured from an investment climate that features lower and lower interest rates and yields.

There are two primary functions of how insurance companies make money. These companies sell policies to consumers who pay premiums in exchange for policy coverage. These premiums are then pooled and invested to generate investment income. How effectively the insurance business is able to balance the spread between inflow (premiums and investment income) versus outflow (claims paid) largely dictates the overall success of the insurance company.

This article was written by

Wealth Insights profile picture
I provide straight forward insights on stocks and markets using fundamental analysis and common sense. - Bachelor's degree in Business Administration with a concentration in Financial Analysis. Been investing and following the markets for more than a decade.- Wealth Insights is an investor, and investment author. His content is not geared to anyone's specific investment goals, time horizons, or risk tolerance. Content is for illustrative purposes only, and is not intended to displace advice from a fee based financial adviser. It is not to be taken as investment advice, or influence investor decision making. Accuracy of data is not guaranteed.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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