Portfolio Update
The FiveTwenty portfolio received no dividends in the past week.
| Past Week Dividend | $0 |
| Current Quarter Dividend (Q2 2022) | $183.11 |
| LifeTime Dividend | $3,467.78 |
| Estimated Annual Dividend | $5,040.44 |
The capital allocation for the week of 05/01/2022 to 05/07/2022 will be used to add to our position in Aflac (NYSE: AFL).
AFL – Position Update
Since our last check-in on AFL in week 1 of 2021, the company announced FY 2021 earnings on 02/02/2022, and Q1 2022 earnings on 04/28/2022. Additionally, the share price increased 32.6% from $43.19 to $57.28 during the period.
| TTM | Prev. Update | 10-year median | |
| Dividend Streak | 39 years | 38 years | |
| Yield (TTM) | 2.43% | 3.06% | 2.34% |
| Payout Ratio | 23.88%1 | 25.22%2 | |
| P/E | 9.841 | 9.772 |
1 computed using TTM adjusted EPS of $5.82 as of Q1 2022.
2 computed using TTM adjusted EPS of $4.42 as of Q3 2020.
Q1 2022 earnings report
Did AFL’s latest earnings report raise any warning flags?
In Q1 2022, Aflac Japan increased pretax adjusted profit margin to 25.3% form 23.1% which resulted in a increase in adjusted pretax earnings on 2.5% on a currency neutral basis. However, in dollar terms pretax adjusted earnings declined 2.8% compared to the year ago quarter. Additionally, total new annualized premium sales decreased 14.8% in the quarter due to a significant impact from pandemic conditions.
For Aflac US incurred benefits and elevated expense, caused pretax adjusted earnings to drop 27% and pretax adjusted profit margin to fall to 19.8% from 27.3% compared to a year ago. On the other hand, sales increased 19% compared to the year ago quarter.
Overall, revenues fell 10.2%, adjusted net income decreased 12.4%, and adjusted EPS were 7.2% lower.
| Revenue (in millions) | Adj. Net Income (in millions) | Adj. EPS . | |
| Q1 2021 | $5,869 | $1,058 | $1.53 |
| Q1 2022 | $5,272 | $963 | $1.42 |
| % Change | (10.2)% | (12.4)% | (7.2)% |
Additional noteworthy developments during the quarter:
- As part of the Q1 earnings report, AFL declared a second quarter dividend of $0.40 per share payable 06/01/2022 to shareholders or record 05/18/2022.
- AFL deployed $500 million to repurchase 8.0 million shares during the quarter. At then end of March 2022 the company had 47.8 million remaining shares authorized for repurchase.
Thesis
Why are we adding to our position in AFL?
Going into Q1 2022 earnings report and following the report, AFL share price has dropped significantly to a point where the yield and PE offers an attractive valuation. The Q1 2022 earnings report pointed at a number of headwinds the company is facing.
However, management reiterated their commitment to returning capital to shareholders in the forms of dividends and share buybacks. They also signaled confidence in continue growth of the core business. Sales for Aflac Japan are expected to accelerate in the second half of the year as COVID restrictions ease. And Aflac US expects to see increased contributions from the newly acquired healt platforms.
Overall, we are looking at the share price weakness as an opportunity to add to our position at a reasonable valuation. We fully expect AFL to successfully navigate the current situation and return to consitent growth in the coming years.
Previous Articles
Additional Research
Photo by XIBEI JIA on Unsplash
One Reply to “2022 Week 18: Aflac (NYSE: AFL)”
Comments are closed.