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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Ameriprise Financial Services in Focus
Headquartered in Minneapolis, Ameriprise Financial Services (AMP) is a Finance stock that has seen a price change of 3.67% so far this year. The financial services company is paying out a dividend of $1.04 per share at the moment, with a dividend yield of 2.06% compared to the Financial - Investment Management industry's yield of 1.5% and the S&P 500's yield of 1.45%.
Taking a look at the company's dividend growth, its current annualized dividend of $4.16 is up 1.7% from last year. Ameriprise Financial Services has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 8.83%. Looking ahead, future dividend growth will be dependent on earnings growth and 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 25%. This 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 2021 is $19.02 per share, with earnings expected to increase 35.09% from the year ago period.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that AMP is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Ameriprise Financial, Inc. (AMP) : Free Stock Analysis Report
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