The company’s last dividend increase was in May 2013 when the Board of Directors approved a 15.60% increase in the quarterly distribution to 52 cents /share. The company’s peer group includes Principle Financial Group (PFI), Northern Trust (NTRS) and Waddell & Reed (WDR).
Since going public in 2005, this dividend growth stock has more than doubled in price.
The company has managed to deliver a 5. % average increase in annual EPS since 2003. Analysts expect Ameriprise Financial to earn $6.60 per share in 2013 and $7.60 per share in 2014. In comparison, the company earned $4.63/share in 2012. Over the next five years, analysts expect EPS to rise by 14.70%/annum.
Overall, I am very bullish on companies that offer the tools to assist the 60 million Baby Boomers in their retirement. As there are 10,000 boomers retiring each day, there is the need for retirement advice. Financial advisors help individual investors craft a plan, and execute it, while trying to create a long-term relationship with the client. The future growth of the company would come from building and retaining long-term relationships with customers. The company has an active sales force of 9,700 financial advisers, which help address customers’ needs by selling them Ameriprise products. Almost 75% of its advisors are independent franchisees, who have the right to use the Ameriprise name.
Future growth will also be dependent on attracting more client money both domestically and internationally. A rising market generally helps in increasing assets under management, which is accretive to revenues and profitability.
The return on equity has been pretty consistent between 8 and 11% over the past decade, with the exception of the dip in 2008, during the depths of the Financial Crisis. 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 20.60% per year over the past five years, which is slightly 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 2003 to 30.90% in 2012. 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 16.20 times earnings, yields 2.50% and has a sustainable distribution. I recently initiated a position in the stock and plan on adding to it on dips.
Full Disclosure: Long AMP
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