AFLAC’s Dividend Streak Is in Jeopardy

When AFLAC (AFL) reported earnings on Tuesday, the company also declared a dividend for the third quarter of 28 cents per share. This news caught my attention because AFLAC hasn’t raised its dividend all year, and the company is famous for its yearly dividend increases.
AFLAC has raised its dividend every year for the past 27 years so if they’re taking this year off, it’s big news. They now have just one quarter to go to keep the streak alive.
Fortunately, CEO Dan Amos said on the conference call that a fourth-quarter increase is probably on the way:

As I have conveyed over the last several quarters, we would like to return to that policy, when we believe it’s prudent to do so, extending our lengthy record 27 consecutive annual increases in the cash dividend that it is important to us and to our owners.
Along those lines, I fully expect the Board of Directors to approve a modest increase in the cash dividend effective with the fourth quarter of this year. Additionally, we continue to believe that share repurchase is an effective means for enhancing shareholder value.

Personally, I can do without the share repurchase. But getting back to the dividends, what’s especially impressive is that AFLAC has not only raised its dividend consistently, it’s done so by a lot. According to my numbers, AFLAC has raised its dividend by at least 12% every year since 1991. That’s as far back as my data goes so the streak may be even longer.
I’m almost positive (say 99% confident) that this is the longest current double-digit dividend increase streak going. I’ve searched and searched and haven’t found one exception.
What’s peculiar is that AFLAC is financially strong enough that it can easily raise its dividend. The company earned $1.35 last quarter so the 28-cent dividend translates to a modest payout ratio of 20.7%. What are they afraid of?
I think it’s that the simply want to build up capital and show the market that they’re in strong financial shape. It’s odd that a move like this could only happen after a crisis, not before.

Posted by on July 29th, 2010 at 10:31 pm

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