Equity income is a good choice for conservative investors who need to rely upon their portfolio to provide income to support their lifestyle.

Equity income investing tends to involve a trade-off between capital gains potential and current cash flow to the investor.  In a depressed market such as the one we are in now, equity income in “safe” companies offers more potential for capital gains than usual, making dividend investing all the more attractive to the conservative investor.

What About Bonds?

Bonds are good for income too, but the income does not increase (with the possible exception of inflation protected bonds and perhaps some variable rate bonds).  Bonds have a definite capital preservation and volatility reduction role in portfolios — and a tax reduction role in the case of municipal bonds.  Dividends from successful companies, however, tend to increase over time, helping the portfolio maintain the purchasing power of its cash income stream.

Contribution

AFLAC Incorporated (AFL) is a leading underwriter of supplemental medical insurance products in the United States and Japan. In the U.S., the company markets and administers its products primarily through its subsidiary, American Family Life Assurance Company of Columbus, and holds the leading share of supplemental health policies sold at the policyholders worksites.

Although it is a U.S. based-company, AFL derived nearly 71% of its $15.4 billion 2007 revenue from its Japanese operations (AFLAC Japan) and the rest from its domestic operations. We remain encouraged by the outlook for AFL's Japan operations, as sales through the new channels (Banks and Japan Post network) are expected to gather momentum this year.

After reviewing 2Q08 results, we are maintaining our FY08 and FY09 estimates and our Hold rating on the shares of AFL, with a six-month target price of $62.00 per share. The shares are currently trading at a price-to-book multiple