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Why Aflac (AFL) is a Top Dividend Stock for Your Portfolio

Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

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 -8.2%. The insurer is paying out a dividend of $0.42 per share at the moment, with a dividend yield of 2.54% compared to the Insurance - Accident and Health industry's yield of 2.51% and the S&P 500's yield of 1.79%.

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Looking at dividend growth, the company's current annualized dividend of $1.68 is up 5% 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 11.72%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Aflac's current payout ratio is 30%. This means it paid out 30% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, AFL expects solid earnings growth. The Zacks Consensus Estimate for 2023 is $5.79 per share, with earnings expected to increase 8.63% from the year ago period.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer 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. With that in mind, AFL is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).

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Aflac Incorporated (AFL) : Free Stock Analysis Report

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Zacks Investment Research