After three relatively turbulent months, Aflac Incorporated (NYSE:AFL) reported its fourth-quarter earnings late last month, and the numbers seemed to be mostly in line with what the market was expecting. Total revenue weakened to $5.42 billion, a 9% decrease year over year, and net earnings, boosted by a one-time tax advantage from the Tax Cuts and Jobs Act, skyrocketed to $2.35 billion, a 213% increase year over year. Operating earnings per share, Aflac's preferred metric for how the underlying bottom line is performing, rose a much more modest 11% year over year to $1.60.

In the company's fourth-quarter conference call, as transcribed by S&P Global Market Intelligence, management seemingly kept coming back to three main points: the recent allegations against the company, the benefits it expects to see from tax reform, and the company's commitment to its dividend. Let's take a closer look at these three factors and see how they might affect Aflac.

Aflac Metrics 2017 Q4 2016 Q4 Change (Loss)
Total revenue $5.42 billion $5.96 billion (8.9%)
Operating EPS $1.60 $1.44 11.1%
Quarterly dividend $0.52 $0.43 20.9%

Data source: Aflac Incorporated.

Accusations and allegations

Earlier this year, a small group of former employees charged Aflac with a number of misdeeds, as reported by The Intercept, ranging in severity from sexual harassment to fraud. In his opening remarks, CEO Daniel Amos addressed these charges:

I want to take a moment to reiterate that when the false allegations were made recently by a very small group of independent contractors in the United States, we responded in a very transparent manner that represents our way of doing business. We posted an over 70-page full report from a special litigation committee of our board, consisting entirely of independent directors, and we've committed to conducting all our operations in the same transparent manner. ... We take all of this very seriously. ... We take swift, corrective action when needed, and we look forward to fighting any false statements made about the company to the fullest extent in the court of law.

Among the actions management has taken is the appointment of an audit committee, chosen from among the board of directors, that is working with independent and outside investigative help. The company has also established a hotline that allows employees to pass by management and speak directly to the audit committee. Amos later added that the committee and the outside investigative group had one more report to finish and that it will be released before the end of February.

Man sitting on couch with leg propped up in cast talking on the phone.

Aflac sells supplemental insurance plans for people who get sick or hurt on the job. Image source: Getty Images.

Aflac's $1.7 billion tax reform windfall

Because of the recently passed tax reform, Aflac recorded a monstrous one-time tax benefit this quarter, which is why its net earnings were up more than 200% year over year. In the company's earnings release, Amos said in a statement that there are three primary ways the company is hoping to reinvest this windfall.

We are pleased that the U.S. tax reforms enacted in December 2017 provided Aflac with an opportunity to accelerate and increase our investments in initiatives that reflect our company values and objectives. As we communicated, we expect to increase overall investment in the U.S. by approximately $250 million over three to five years. These strategic investments target continued growth in the company's U.S. operation, expanded employee benefits and training programs, as well as investing in technology and digital businesses.

Employee benefits will include enhanced 401(k) benefits and company-paid Aflac plans. While management never specifically said what "investing in technology and digital businesses" meant, CFO Fred Crawford later said the intention of these investments would be to "drive greater penetration and greater growth." He later added that seeing greater productivity and efficiency were also factors.

Aflac's big dividend increase

Aflac takes its role as a Dividend Aristocrat seriously and has now raised its dividend for 35 consecutive years. In Aflac's 2017 third quarter, the company raised its dividend a modest 4.7%. What makes the fourth quarter special is that Aflac again raised its dividend, and this time, it was by a much higher 15.6%. The new raise to quarterly dividend payments of $0.52 gives the company a 2.47% dividend yield based on the stock's price as I type. Just last quarter it was under 2%. The price drop resulting from the allegations and the two dividend raises certainly give the dividend yield a nice boost.

Amos said that while the board reserves the right to review the dividend on a quarterly basis, the company is now expecting to shift its annual increase to the first quarter. He also went on to say that Aflac "treasures" its 35-year streak of dividend growth.

Aflac is one of the few companies that will benefit from rising interest rates, as it invests its float, the premium Aflac collects before it pays out claims, in bonds. The company's rising dividend yield and history of rising payouts should also give it a higher floor than other companies have in a down market. Of course, the allegations hanging over its head could continue to weigh it down, and interested investors should examine the company's final report on the matter later this month to see if the company has satisfactorily answered the charges. If it has, investors could probably do a lot worse than considering a company such as Aflac in a volatile market such as the one we find ourselves in.

Matthew Cochrane has no position in any of the stocks mentioned. The Motley Fool recommends Aflac. The Motley Fool has a disclosure policy.