Aflac Incorporated’s ( AFL Quick Quote AFL - Free Report) board of directors recently approved a 17.9% hike in the first quarter 2021 dividend in a bid to enhance shareholder value. With this, the payout now stands at 33 cents per share compared with the prior payout of 28 cents. Shares of Aflac have gained 2% in the last day’s trading as of Nov 19.
The meatier dividend, which marked the 38th straight year of dividend hike, will be paid on Mar 1, 2021 to shareholders of record as on Feb 17.
Prior to this, the company had raised quarterly dividend by 3.7% to 28 cents per share this year in February.
Notably, the company has grown its dividend at a three-year CAGR of 8.3%. Based on the stock’s Nov 19 closing price of $43.72, the new dividend will yield 2.6% to the company.
Assurant, Inc. ( AIZ Quick Quote AIZ - Free Report) and American Equity Investment Life Holding Company ( AEL Quick Quote AEL - Free Report) from the insurance space have undertaken similar measures. While Assurant approved a 5% hike in its quarterly dividend, American Equity approved a 6% raise in its annual dividend.
Besides regular dividend hike, Aflac, a leading accident and health insurer, also buys back shares. This August, the company’s board authorized an increase in its existing share repurchase program, which has enabled the company to buy back additional shares of up to 100 million. Such initiatives not only reflect the operational and financial strength of the company but also make the stock attractive to yield-seeking investors.
Moreover, the company has bought back 26.1 million shares worth $1 billion for the first nine months of 2020, which includes 10.9 million shares bought back for $400 million in the third quarter of 2020. The company had 110.9 million shares remaining under its buyback program as of Sep 30, 2020.
It’s worth mentioning that Aflac did not intend to temporarily halt share repurchases amid the ongoing coronavirus crisis, which has compelled most insurance companies to do the same.
Furthermore, Aflac enjoys strong liquidity position, which not only mitigates balance sheet risks but also paves the way for an accelerated capital deployment. Also, strong cash flows have enabled the company to undertake several growth initiatives, which position it well for long-term growth.
The recent dividend hike further reinforces the company’s sound financial prospects. Aflac exited third-quarter 2020 with a sturdy cash balance of $5.6 billion, which increased 13.9% from 2019-end level.
Additionally, return on equity, a profitability measure to identify how efficiently the company is utilizing its shareholders fund, stands at 12.1% as of Sep 30, 2020, which remains higher than the
industry’s average of 11.9%.
Shares of Aflac, which carries a Zacks Rank #2 (Buy), have lost 19.2% in a year compared with the industry’s decline of 16.6%. Nevertheless, we believe the company’s numerous growth initiatives for enhancing product offerings and broadening distribution network, and cost-control efforts are likely to drive its shares in the days ahead.
Another Stock to Consider
Another top-ranked insurance stock includes
Fidelity National Financial, Inc. ( FNF Quick Quote FNF - Free Report) , which sports a Zacks Rank #1 (Strong Buy). You can see . the complete list of today’s Zacks #1 Rank stocks here
Fidelity National has a trailing four-quarter earnings surprise of 30.48%, on average.
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