Aflac Ups Dividend, Resumes Buyback - Analyst Blog

After a satisfactory performance in the second quarter, Aflac Inc. (AFL) further enhanced its value by declaring a 7.1% hike in its dividend and by recommencing its share repurchase program that was shelved in 2008.

Aflac’s business operations had got a hard thrashing by the financial crisis that peaked in 2008, a condition similar to its peers. The global market crisis had significantly impacted the investment returns of the company that restricted growth opportunities. Particularly, Aflac’s U.S. wing had an elbow in the eye with reduced consumption levels that adversely affected the premiums and investment income.

However, Aflac fairly weathered the storm, given the strong position in its Japan wing, the CAIC acquisition in 2009 and the improving markets that are favourably affecting the dollar/yen exchange rates while providing investment opportunities.

Moreover, despite challenging economic conditions that has marred the insurance industry, Aflac continues to enjoy a fair liquid position. The company’s investments and cash position is experiencing a steady growth. It increased to $73.2 billion in 2009 from $68.6 billion in 2008 and $57.1 billion in 2007, thereby providing ample operating leverage to the balance sheet.

Dividend Hike

Based on this sturdy liquidity position, on Tuesday Aflac raised its fourth quarter dividend from 28 cents to 30 cents per share. The increased dividend is payable on December 1, 2010 to the shareholders of record as on November 17, 2010.

Share Repurchase in Vicinity