Over the past 10 years Ameriprise Financial, Inc. (NYSE:AMP) has been paying dividends to shareholders. The company currently pays out a dividend yield of 2.9% to shareholders, making it a relatively attractive dividend stock. Should it have a place in your portfolio? Let’s take a look at Ameriprise Financial in more detail.
How I analyze a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is their annual yield among the top 25% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share risen in the past couple of years?
- Is is able to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Ameriprise Financial fit our criteria?
The company currently pays out 24% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 24% which, assuming the share price stays the same, leads to a dividend yield of around 3.3%. Furthermore, EPS should increase to $15.12.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. AMP has increased its DPS from $0.68 to $3.6 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes AMP a true dividend rockstar.
Relative to peers, Ameriprise Financial produces a yield of 2.9%, which is high for Capital Markets stocks but still below the market’s top dividend payers.
With these dividend metrics in mind, I definitely rank Ameriprise Financial as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three important factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for AMP’s future growth? Take a look at our free research report of analyst consensus for AMP’s outlook.
- Valuation: What is AMP worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether AMP is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.