This is Why Ameriprise Financial Services (AMP) is a Great Dividend Stock
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Ameriprise Financial Services in Focus
Based in Minneapolis, Ameriprise Financial Services (AMP) is in the Finance sector, and so far this year, shares have seen a price change of -2.42%. The financial services company is currently shelling out a dividend of $2.08 per share, with a dividend yield of 2.56%. This compares to the Financial - Investment Management industry's yield of 2.29% and the S&P 500's yield of 1.69%.
Looking at dividend growth, the company's current annualized dividend of $4.16 is up 9.2% from last year. Over the last 5 years, Ameriprise Financial Services has increased its dividend 5 times on a year-over-year basis for an average annual increase of 9.42%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Ameriprise's payout ratio is 25%, which means it paid out 25% of its trailing 12-month EPS as dividend.
AMP is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $16.35 per share, which represents a year-over-year growth rate of 1.55%.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, AMP is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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