Income Investors Should Steer Clear of AllianceBernstein Holding LP (NYSE:AB)

Simply Wall St June 14, 2018

Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Over the past 10 years, AllianceBernstein Holding LP (NYSE:AB) has returned an average of 8.00% per year to shareholders in terms of dividend yield. Does AllianceBernstein Holding tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. Check out our latest analysis for AllianceBernstein Holding

5 questions I ask before picking a dividend stock

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

  • Does it pay an annual yield higher than 75% of dividend payers?
  • Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
  • Has dividend per share risen in the past couple of years?
  • Is is able to pay the current rate of dividends from its earnings?
  • Will it have the ability to keep paying its dividends going forward?

NYSE:AB Historical Dividend Yield June 14th 18
NYSE:AB Historical Dividend Yield June 14th 18

How well does AllianceBernstein Holding fit our criteria?

The company currently pays out 110.05% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is not sufficiently covered by its earnings. Going forward, analysts expect AB’s payout to remain around the same level at 100.79% of its earnings, which leads to a dividend yield of around 9.12%. In addition to this, EPS should increase to $2.52. If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Dividend payments from AllianceBernstein Holding have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves. Compared to its peers, AllianceBernstein Holding has a yield of 7.86%, which is high for Capital Markets stocks.

Next Steps:

After digging a little deeper into AllianceBernstein Holding’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. 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. Below, I’ve compiled three important aspects you should further research:

  1. Future Outlook: What are well-informed industry analysts predicting for AB’s future growth? Take a look at our free research report of analyst consensus for AB’s outlook.
  2. Valuation: What is AB 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 AB is currently mispriced by the market.
  3. Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.