Recent Buy: April 2014

Aflac-Logo-MC-spon  Looking for value in an overheated market is getting hard. However my job situation is going great and I don’t see my income stopping any time soon so today I bought 24 shares of Aflac for $61.95 a share with a yield of 2.40%. This purchase will add $35.52 to my 12 month forward dividends for an annual total of $600.52. This is a new position for me and I am now currently invested in 12 companies.

Over 50 million people worldwide use Aflac insurance with a heavy concentration in Japan. You probably know them from the commercials with the duck. Yeah yeah, insert duck joke. Aflac’s price has been all over the place in recent years and time will tell if I got in with a good valuation.

Here are some of the many things I like about Aflac:

  • It’s a Dividend Aristocrat with 31 years of dividend raises.
  • Currency rates are bringing down the valuation to a current P/E of 9.20.
  • Even with a decreasing yen, like many times before, Aflac continues solid EPS and ROE growth.
  • Management is taking advantage of current prices with share buybacks up to 12%.

So why is the P/E so low?

Aflac’s historical average P/E ratio from 1996 to now has been around 16. Before 2008, the company was consistently trading well above this P/E. Since 2008, even with a lot of great growth, the average P/E has been closer to 11. The current P/E of 9.20 seems to represents a good buying opportunity.

A major concern with Aflac is lack of geographic diversity. About ¾ of the company profits come from Japan. Since the end of 2012, the yen has not been performing well versus the dollar. In the last two years the yen has weakened to the US dollar by almost 26%; right now 102.1750 yen equals a dollar. While researching, I found these rates to be extremely unstable. In fact it seems that prior to 2008 it took many more yen on average to equal a dollar. For instance, in August of 1998, it took 146 yen to equal a dollar; however, only a short year later, 101 yen equaled a US dollar. It seems that in the past Aflac has been through some extreme currency rate fluctuations and has consistently proven it can still grow despite it. On top of this, Aflac only converts a small percentage of yen to US dollars each year. Also, while almost 50% of Aflac’s portfolio is in Japanese debt, Aflac hopes to better diversify in 2014.

I’m expecting a lot of volatility in this stock and on any major pullbacks, I will add to my position. I’m happy to become a shareholder and hope to reap the rewards for years to come.

What are your thoughts on AFL?

My Dividend Growth

http://www.mydividendgrowth.com

View more posts from this author
8 thoughts on “Recent Buy: April 2014
  1. Dividend Mantra

    Ryan,

    Great purchase here. I think AFL is one of those hidden gems in the market right now. Hiding in plain sight.

    I already own 100 shares, so my position is full on this one. But I was happy to load up! 🙂

    Happy to have you as a fellow shareholder. Quack, quack!

    Best wishes.

     
    Reply
    1. My Dividend Growth

      Jason,

      I’m glad to be aboard and thank you for the support. I hear you on a gem hiding in plain sight, I was very skeptical at first glance. I feel a lot more comfortable now that I’ve looked into things and look forward to the continued research over the coming years. It feels great that my portfolio is becoming more diverse. I’m excited to see where your capital will go next!

      Best wishes,
      Ryan

       
      Reply
  2. My Dividend Pipeline

    Ryan,

    Nice purchase! Aflac should serve you well for years to come. I have wanting to add an insurance name to my portfolio but missed out on Travelers a couple of months ago when it was in the low 80s.

    MDP

     
    Reply
    1. My Dividend Growth

      MDP,

      I’m glad you approve! I hear you on wanting recent prices again. Hopefully soon there will be more obvious buys! I think Travelers still has a huge amount of potential and value even at these higher levels. I’m excited to see which insurance company you add.

      I really appreciate you taking time to stop by!

      All my best,
      Ryan

       
      Reply
  3. Huw

    Hey Ryan,

    Congratulations on the purchase. 31 years of increasing dividends is awesome and any P/E below 10 has my attention.

    You must be chuffed that your 12 month forward dividends are now over $600. I hope you can continue to climb towards your $750 goal this year.

    Keep up the good work my friend!

    Cheers
    Huw

     
    Reply
  4. walletengineers

    I bought 26 shares @ 50.75 and I’d still buy more at $63.XX! I agree with Dividend Mantra that it’s a great buy. I don’t think you can go wrong with Aflac. I’d rank it behind JNJ/KO juggernauts in terms of staying clout, but still top of my list from a mathematical/finance stand.

     
    Reply
    1. My Dividend Growth

      Wallet Engineers,

      Glad to see you going through some older posts! I’m happy to join you as a fellow shareholder of Aflac so we can make money and duck puns together. You got in at a great price and I’m thinking about adding to my position this month. I really need to hop on JNJ and KO as soon as possible. I just wish they’d fall in price a little, but I’m really risking them going up even more. Well I suppose I should shut my beak. Happy investing to you!

       
      Reply

Join the Conversation...