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?
- 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.
- Abenomics has only helped to lower the value of the USD:JPY exchange rate. This has caused lower repatriated profits for the US company.
- 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.
- 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.
- 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.
- 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.
- 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.
