Ameriprise Financial, Inc. (NYSE:AMP) will increase its dividend on the 19th of May to $1.60, which is 8.1% higher than last year's payment from the same period of $1.48. Although the dividend is now higher, the yield is only 1.3%, which is below the industry average.
We've discovered 1 warning sign about Ameriprise Financial. View them for free.Ameriprise Financial's Payment Could Potentially Have Solid Earnings Coverage
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Ameriprise Financial's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to expand by 49.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 14%, which is in the range that makes us comfortable with the sustainability of the dividend.
See our latest analysis for Ameriprise Financial
Ameriprise Financial Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $2.32 in 2015, and the most recent fiscal year payment was $5.92. This implies that the company grew its distributions at a yearly rate of about 9.8% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
Ameriprise Financial May Find It Hard To Grow The Dividend
Investors could be attracted to the stock based on the quality of its payment history. Earnings has been rising at 3.1% per annum over the last five years, which admittedly is a bit slow. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.
We Really Like Ameriprise Financial's Dividend
Overall, a dividend increase is always good, and we think that Ameriprise Financial is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Ameriprise Financial that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.