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Ameriprise Financial, Inc. (NYSE:AMP) has announced that it will be increasing its periodic dividend on the 19th of May to $1.60, which will be 8.1% higher than last year's comparable payment amount of $1.48. This takes the annual payment to 1.3% of the current stock price, which unfortunately is below what the industry is paying.
Our free stock report includes 1 warning sign investors should be aware of before investing in Ameriprise Financial. Read for free now.
Ameriprise Financial's Future Dividend Projections Appear Well Covered By Earnings
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Ameriprise Financial was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into 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 works out to be a compound annual growth rate (CAGR) of approximately 9.8% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
Ameriprise Financial May Find It Hard To Grow The Dividend
The company's investors will be pleased to have been receiving dividend income for some time. Earnings per share has been crawling upwards at 3.1% per year. While EPS growth is quite low, Ameriprise Financial has the option to increase the payout ratio to return more cash to shareholders.
Ameriprise Financial Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Ameriprise Financial that investors need to be conscious of moving forward. 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.