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Why Aflac (AFL) is a Great Dividend Stock Right Now

Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Aflac in Focus

Based in Columbus, Aflac (AFL) is in the Finance sector, and so far this year, shares have seen a price change of -2.53%. Currently paying a dividend of $0.5 per share, the company has a dividend yield of 2.49%. In comparison, the Insurance - Accident and Health industry's yield is 2.49%, while the S&P 500's yield is 1.59%.

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In terms of dividend growth, the company's current annualized dividend of $2 is up 19% from last year. Aflac has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 12.68%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Aflac's current payout ratio is 27%. This means it paid out 27% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for AFL for this fiscal year. The Zacks Consensus Estimate for 2024 is $6.43 per share, with earnings expected to increase 3.21% from the year ago period.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers a quarterly payout.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that AFL is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).

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Aflac Incorporated (AFL) : Free Stock Analysis Report

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Zacks Investment Research