Ameriprise Financial, Inc. (NYSE:AMP) has pleased shareholders over the past 10 years, by paying out dividends. The company currently pays out a dividend yield of 2.8% 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.
5 checks you should use to assess a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has the amount of dividend per share grown over the past?
- Does earnings amply cover its dividend payments?
- Will it be able to continue to payout at the current rate in the future?
How well does Ameriprise Financial fit our criteria?
Ameriprise Financial has a trailing twelve-month payout ratio of 24%, which means that the dividend is 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 3.2%. In addition to this, EPS should increase to $15.12.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. AMP has increased its DPS from $0.68 to $3.6 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes AMP a true dividend rockstar.
Relative to peers, Ameriprise Financial has a yield of 2.8%, 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 urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three relevant 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.