Ameriprise Financial, Inc. (NYSE:AMP), through its subsidiaries, provides a range of financial products and services in the United States and internationally. Ameriprise operates in five segments - Advice & Wealth Management, Asset Management, Annuities, Protection and Corporate & Other. The company was created as a result of a spin-off from American Express (NYSE:AXP) in 2005. Ameriprise Financial has paid dividends since 2005, and has increased them every year since then.
The company's last dividend increase was in April 2014 when the Board of Directors approved a 11.50% increase in the quarterly distribution to 58 cents /share. The company's peer group includes Principal Financial Group (NYSE:PFG), Northern Trust (NASDAQ:NTRS) and Waddell & Reed (NYSE:WDR).
Since going public in 2005, this dividend growth stock has more than doubled in price.
The company has managed to deliver a 12% average increase in annual EPS since 2004. Analysts expect Ameriprise Financial to earn $9.76 per share in 2015 and $11.14 per share in 2016. In comparison, the company earned $8.74/share in 2014. Over the next five years, analysts expect EPS to rise by 17%/year.
Ameriprise Financial has actively used share buybacks to reduce the number of shares outstanding from 247 million in 2005 to 191 million by 2014.
The return on equity has been pretty consistent between 8 and 11% between 2005 and 2012.The only dip was in 2008, during the depths of the financial crisis. Since then, this indicator has been going up and is reaching 20% in 2014. I generally want to see at least a stable return on equity over time. I use this indicator to assess whether management is able to put extra capital to work at sufficient returns.
The annual dividend payment has increased by 27.20% per year over the past five years, which is higher than the growth in EPS. This was possible because as a new dividend payer, Ameriprise started paying out a small amount, which was later increased significantly.
The dividend payout ratio has increased from 5% in 2005 to 25.90% in 2014. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
Currently Ameriprise Financial is attractively valued at 12.90 times forward earnings, yields 1.85% and has a sustainable distribution. I recently added to my position in the stock and plan on adding to it further if current yield is closer to 2.50%.
Full Disclosure: Long AMP, TROW
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