The Duck Thrives in Japan

This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

The New York Sun


PRICE: $46.81
52 WEEK RANGE: $42.72-$49.65

Rick Helm is the portfolio manager of the Cohen and Steers Dividend Value Fund (DVFAX). He is also the senior vice president of the fund. Mr. Helm spoke to Katharine Herrup of The New York Sun about how the yellow duck has made AFLAC so popular, especially in Japan.

What does the company do?

AFLAC is a specialty life insurance company based out of Georgia.

Why do you like the stock?

We just think AFLAC is a well-positioned and well-managed company that has a lot of unexplored territory in the U.S. and Japan in terms of deeper market penetration and new products. They have had the same management team for a while, and CEO, Dan Amos, has been in place since 1990, so they have very consistent management which has led to superior financial management – their return on equity has been significantly higher than the average life insurance company, earning 15% over the last 15 years.

AFLAC also has brand recognition going on. People know the AFLAC yellow duck, which has raised their brand awareness to 90% from 13%. The yellow duck also raised awareness in Japan. The duck ring tone is one of the most downloaded ring tones by Japanese mobile phone users.

Out of all the insurance companies, why do you like AFLAC?

What most people don’t realize is that two-thirds of AFLAC’s entire sales comes out of Japan. One in four Japanese households has one of their products so they have strong penetration and a very strong brand name in Japan. Many people in Japan don’t even realize they are an American company.

The company became interested in Japan when one of their senior executives visited Japan and noticed Japan is a risk averse population, and it is a growing nation. Before that AFLAC was basically just a domestic company primarily in the South.

We focus on dividend growth because we think it is an indicator of healthy companies.AFLAC has grown their dividend an average of 18% per year over the last 10 years and they expect that to grow as much as earnings over the next several years and that growth rate will probably be in the 14-15% growth range. The dollar/yen exchange rate is also important to them, so if the U.S.dollar weakens it will be beneficial to AFLAC. So you can actually see slightly better growth rates because of a weaker dollar going forward.

What do you think the stock is worth?

We think its worth is in the mid-60s – that’s our target price, we think they should hit it over the next three years or so.

What’s driving growth forward?

I think it’s just the way they conduct their business – they have been careful not to dilute their business, they stay focused, and they do not commoditize products.

Is it a good time to buy?

It’s gotten as high as $49.65 and almost a year ago it was down to about $42.72, so you are in the middle of the range that it has been trading in. We actually think this current value is still attractive.

What are the risks?

If you saw a significant economic slowdown in the U.S. or Japan where companies or individuals would not be able to offer AFLAC’s products is the primary risk.

The New York Sun

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