Last update on 2024-06-27

Ameriprise Financial (AMP) - Dividend Analysis (Final Score: 6/8)

Ameriprise Financial (AMP) dividend analysis scores 6/8, evaluating performance and stability with 8 criteria. Learn more on the yield, growth, and payout ratios.

Short Analysis - Dividend Score: 6

We're running Ameriprise Financial (AMP) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Ameriprise Financial (AMP) underwent a dividend analysis based on an 8-criteria scoring system, scoring 6 out of 8. Key findings include: 1. Dividend yield of 1.3954% in 2023, lower than the industry average of 4.33% but influenced by a significant stock price appreciation (from $41 in 2005 to $379.83 in 2023). 2. Over the past 20 years, the dividend growth rate averaged 27.7015%, significantly exceeding the 5% threshold. 3. The payout ratio averaged 2.23%, well below the 65% threshold, suggesting ample room for reinvestment. 4. Dividends were consistently covered by earnings, indicated by a historical cover ratio favorably below 1. 5. Dividend sustainability was supported by healthy free cash flow. 6. Stable and increasing dividends since 2005, totaling 18 years. 7. Stock repurchases reduced outstanding shares by roughly 59% over 20 years. AMP missed marks on high dividend yield and paying dividends for over 25 years but displayed strong growth and stable payouts.

Insights for Value Investors Seeking Stable Income

Based on the analysis, Ameriprise Financial (AMP) exhibits strong financial stability and a reliable dividend policy, which makes it an attractive option for growth-oriented investors. However, income-focused investors might be wary of its lower dividend yield compared to the industry average. For those looking for a historically growing and stable dividend with potential for capital appreciation, AMP is worth considering.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield is a financial ratio that indicates how much a company pays out in dividends each year relative to its stock price. It is an important metric for investors, especially those seeking income, as it reflects the return in the form of dividends on the current market price of the stock.

Ameriprise Financial (AMP)'s dividend yield for 2023 stands at 1.3954%, which is notably lower than the industry average of 4.33%. Over the last 20 years, AMP's dividend yield has fluctuated, peaking at 3.3822% in 2018 and showing a significant drop by 2023. However, it's essential to note that AMP's stock price has also seen substantial growth, closing at $379.83 in 2023 compared to $41 in 2005. The combination of a rising stock price and a growing dividend per share (from $0.11 in 2005 to $5.30 in 2023) suggests a robust financial performance, even if the yield itself is currently under the industry average. Investors might view the lower yield as a consequence of stock price appreciation, which is generally a positive sign, though it may not appeal to income-focused investors.

Average annual Growth Rate higher than 5% in the last 20 years?

Dividend Growth Rate over a 20-year period

The Dividend Growth Rate, essentially, measures how much a company's dividend payments have increased year over year. A rate higher than 5% is often considered robust and could indicate a company's strong financial health and confidence in future earnings. For Ameriprise Financial, which reports dividend ratios over the past 20 years, the average ratio stands at 27.7015%. A trend higher than 5% consistently over 20 years demonstrates a firm's commitment to enriching its shareholders and signifies potential for long-term, sustainable growth.

Average annual Payout Ratio lower than 65% in the last 20 years?

The average payout ratio indicates the percentage of earnings a company pays to its shareholders in the form of dividends. A payout ratio lower than 65% is a common threshold indicating the company's ability to sustain dividend payments while retaining earnings for growth.

Ameriprise Financial (AMP) significantly maintains an average payout ratio of 2.23% over the past 20 years, which is well below the 65% threshold. This is an excellent trend, showing the company's prudent approach to balancing dividend payments and earnings retention. Notably, the substantial negative payout ratio in 2008 likely skews the average, reflecting a challenging period perhaps related to the broader financial crisis. Nonetheless, in most years, AMP's payout ratio hovers at a healthy, low level, reinforcing its capacity to manage dividends without jeopardizing financial stability.

Dividends Well Covered by Earnings?

Whether dividends are covered by earnings indicates the sustainability of dividend payments.

Examining the historical data of Ameriprise Financial (AMP), the Earnings Per Share (EPS) has generally been higher than the Dividend Per Share (DPS). The ratio of dividends covered by earnings is consistently below 1, signifying that earnings comfortably cover dividends. For instance, in 2021, EPS was 29.13, while DPS was 4.43, resulting in a cover ratio of approximately 6.57. This trend indicates that AMP has maintained a prudent dividend policy, supporting the sustainability of its dividend payments. Therefore, this is a positive trend for shareholders.

Dividends Well Covered by Cash Flow?

The criterion \

Free cash flow (FCF) represents the amount of cash a company generates after accounting for capital expenditures, and it's crucial as it reflects the company's capacity to sustain operational efficiency and financial health. It's paramount in evaluating dividend sustainability because, in essence, dividends are disbursed from these cash reserves. A healthy FCF allows a company to not only pay dividends but also to reinvest in growth opportunities without resorting to excessive debt or equity dilution. The ratio of dividends to FCF, therefore, provides insight into how comfortably a company can continue its dividend payments.

Stable Dividends Since the Company Began Paying Dividends?

Significance of dividend stability over 20 years for a financial analysis.

The stability of dividends is crucially important for income-seeking investors as it reflects a company’s ability to generate consistent income and manage its resources over time. If dividends are stable or increasing, investors can rely on that income. When dividends drop by more than 20%, it might indicate potential financial troubles or changing priorities within the company.

Dividends Paid for Over 25 Years?

The analysis of a company's ability to pay dividends consistently for over 25 years is crucial as it demonstrates financial stability and a reliable return for investors.

Ameriprise Financial (AMP) has been consistently paying dividends since 2005, which adds up to 18 years, falling short of the 25 years criterion. However, the trend in dividends per share is positive, showing consistent growth from $0.11 in 2005 to $5.30 in 2023. This upward trend in dividends reflects strong financial health and a commitment to rewarding shareholders, despite not meeting the 25-year benchmark. The continuous increase, especially through turbulent times like the 2008 financial crisis, is a good indicator of the company's resilience and robust earnings capability.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Ameriprise Financial (AMP) and why it is important to consider

The importance of analyzing stock repurchase trends lies in understanding a company's commitment to returning value to shareholders. Reliable and consistent stock repurchases indicate strong cash flow and confidence in the firm's future prospects. For Ameriprise Financial, examining the numbers between 2003 and 2023, it is evident that the number of shares outstanding has decreased from 245,762,712 in 2003 to 100,173,212 in 2023, reflecting a roughly 59% reduction in shares over 20 years. The company achieved reliable repurchased shares in almost every year except for a few. Analyzing the data shows an average repurchase rate of -4.26% over the last 20 years, which signifies a positively strong and consistent buyback strategy. Therefore, this trend is good as it demonstrates a consistent effort to enhance shareholder value and earnings per share.