Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a 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 -9.06%. Currently paying a dividend of $1.04 per share, the company has a dividend yield of 2.75%. In comparison, the Financial - Investment Management industry's yield is 2.97%, while the S&P 500's yield is 1.88%.
Taking a look at the company's dividend growth, its 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 9.28%. 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. Ameriprise's current payout ratio is 22%, meaning it paid out 22% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for AMP for this fiscal year. The Zacks Consensus Estimate for 2020 is $16.62 per share, with earnings expected to increase 3.23% from the year ago period.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, AMP presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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Ameriprise Financial, Inc. (AMP) : Free Stock Analysis Report
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