The Case for Aflac

Unlike the stock featured on my previous post, my old screen gave me a decent company with Aflac.It hasn't soared, but my current option strategy does not require a fly highing stock, just one that is stable to be profitable. And this is what AFL has given me. It is a stock with a long history of rising dividends and currently with a low PE ratio of 9.4 with an expected 5 yr Earnings growth of 6%pa.

So why is the duck not soaring?

1. Japan. 74% of AFL business is in Japan and the country is now "officially" in recession with the last two quarters' GDP print being negative. 
2. Abenomics has only helped to lower the value of the USD:JPY exchange rate. This has caused lower repatriated profits for the US company.
3. Although the company is a steady operator, it's next year expected earnings growth rate is almost zero. More growth is expected in the out years, though.

But let us get back to the good things that will sustain AFL's strong balance sheet, steady cash flow and stable price base.

1. In Japan, it has a very solid agreement with Japan Post. In case you are not aware, the japanese use the post office as a bank, making it one of the world's largest financial institutions. This makes it a perfect venue for selling all kinds of insurance. The agreement should help the revive growth of japanese sales for the company.
2. On top of the long history of increasing dividends, making it part of the S&P Dividend Aristocrats list, it has also been implementing Share Repurchase Program that should give some price support to the stock price by increasing the EPS.
3. As a company, it has one of the most respected and admired companies in the world.This reputation makes it an easy sell to clients, representatives and all other stakeholders.
4. Sales in the United States are slowly growing, but should improve along with the employment picture given that much of the insurance are sold through employers.

Keep on Quacking.