AFLAC Incorporated (NYSE:AFL) is $26-billion supplemental health and life insurance provider in Japan and the United States. It is Japan’s largest insurance company in terms of individual insurance policies. The company is a dividend aristocrat that has boosted dividends for 30 consecutive years. Its dividend yield is 2.6% on a low payout ratio of 23%. Aflac’s dividend growth over the past five years averaged nearly 11% per year. Given its low payout ratio and the forecasted EPS CAGR of 10.2% for the next five years (faster than 7.2% achieved over the past five years), dividend growth is likely to be sustained. Aflac derives 83% of its revenues from Japan, where it is experiencing robust growth. It is holding substantial yen-denominated assets. However, in recent years, Aflac has been building up its investment position in U.S government and corporate bonds. The U.S. Affordable Care Act requirement that all U.S. citizens have health insurance will likely bolster the insurance provider’s growth in the U.S. market. Aflac has a strong balance sheet, with little debt, and is a robust cash flow generator. Notwithstanding its trading close to a 52-week high, Aflac’s stock has a low P/E of 8.0x, on par with the life insurance industry. Citadel Investment’s Ken Griffin is particularly bullish about Alfac.
Occidental Petroleum Corporation (NYSE:OXY) is a $64-billion integrated oil and natural gas producer. The company has raised dividends each year since 2002. Its dividend is yielding 2.8% on a payout ratio of 30%. Occidental Petroleum has seen robust dividend growth, averaging 18.1% annually over the past five years. The firm’s revenue growth is expected to resume next year with a 5% sales increase. For the next five years, its EPS CAGR will average about 9%. The stock is trading well below its five-year valuation metrics such as price-to-book, price-to-sales, and price-to-cash flow. With a forward P/E of 11.0x, the stock is at a discount to its respective industry (forward P/E of 14.1x). Its rival Exxon Mobil Corporation (NYSE:XOM) forward P/E is almost on par with that of OXY, while Chevron Corporation (CVX) is cheaper than OXY based on the same metric. Among fund managers, Ric Dillon (Diamond Hill Capital—check out its top picks) and Relational Investors’ Ralph Whitworth are big investors in the stock.
Allegheny Technologies Incorporated (NYSE:ATI) is a $3.2-billion specialty metals producer with customers in the aerospace, defense, automotive, and medical industries. The company’s dividend is yielding 2.4% on a payout ratio of 44%. Its dividend has been flat at $0.18 per share since 2007. Analyst forecast the company’s EPS CAGR at 15%, which is highly dependent on the global economic rebound. The company remains optimistic about it long-term growth prospects, in particular in China. However, it is dependent on raw materials, whose elevated prices remain a source of pressure on the company’s performance. ATI is trading at price-to-book, price-to-sales, and price-to-cash flow ratios well below industry averages. However, with a forward P/E of 19.1x, the stock is quite expensive relative to its peer group on average (forward P/E of 14.4x). Billionaire Jim Simons is a buyer of this stock.