Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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
Headquartered in Minneapolis, Ameriprise Financial Services (AMP) is a Finance stock that has seen a price change of -15.62% so far this year. The financial services company is currently shelling out a dividend of $0.97 per share, with a dividend yield of 2.76%. This compares to the Financial - Investment Management industry's yield of 2.78% and the S&P 500's yield of 2.04%.
In terms of dividend growth, the company's current annualized dividend of $3.88 is up 1.8% from last year. In the past five-year period, Ameriprise Financial Services has increased its dividend 5 times on a year-over-year basis for an average annual increase of 10.24%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Right now, Ameriprise's payout ratio is 24%, which means it paid out 24% 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 $18.27 per share, with earnings expected to increase 13.48% from the year ago period.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers 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 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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