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Aflac's (NYSE:AFL) Upcoming Dividend Will Be Larger Than Last Year's

The board of Aflac Incorporated (NYSE:AFL) has announced that it will be paying its dividend of $0.42 on the 1st of June, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 2.5%.

Check out our latest analysis for Aflac

Aflac's Payment Has Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, prior to this announcement, Aflac's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

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Looking forward, earnings per share is forecast to fall by 7.5% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 27%, which is comfortable for the company to continue in the future.

historic-dividend
historic-dividend

Aflac Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the dividend has gone from $0.66 total annually to $1.68. This works out to be a compound annual growth rate (CAGR) of approximately 9.8% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings has been rising at 3.6% per annum over the last five years, which admittedly is a bit slow. If Aflac is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Aflac Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Aflac that investors should take into consideration. Is Aflac not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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