Ameriprise Boosts Shareholder Value

On Wednesday, Ameriprise Financial Inc. (AMP - Analyst Report) announced that it has raised its quarterly cash dividend. This is the fifth dividend rise for the company since 2005, when it became a publicly traded company. During that period, the company paid quarterly dividend of 11 cents per share.

This time, Ameriprise declared a quarterly cash dividend of 28 cents per share, payable on February 24, 2012 to shareholders of record as on February 2010. Hence, the annual dividend payable to the shareholders now stands at $1.12 per share, a jump of about 22% from the prior annual dividend of 92 cents.

Earlier in the second quarter of 2011, Ameriprise had raised its quarterly dividend to 23 cents per share from 18 cents. Amazingly, even at the height of the financial crisis in 2008, Ameriprise increased its quarterly dividend by 2 cents to 17 cents.

Furthermore, Ameriprise is also actively boosting its shareholders’ wealth through share repurchases. Through September 30, 2011, the company has repurchased $1.2 billion of shares and still has $1.7 billion available in its share repurchase authorization, which will expire in June 2013.

Hence, it can be said that the company is quite sincere about enhancing the shareholders’ value regularly through dividend hikes and share buyback programs. This also reflects Ameriprise’s strong financial backbone even during the sluggish economic recovery.

Similar to Ameriprise, one of the industry participants – BlackRock Inc. (BLK - Snapshot Report) is also an active enhancer of shareholder value through dividend hikes. BlackRock has been increasing its dividend at regular intervals. Since 2005, it has also hiked its quarterly dividend nearly 360% from 30 cents per share in 2005 to the present $1.375.

Our Viewpoint

Though there are concerns over the sluggish market recovery, improvement in retail client activity as well as decent growth in Advice & Wealth Management and Asset Management businesses would drive Ameriprise’s operating leverage in the upcoming quarters. Furthermore, Ameriprise’s capital deployment activity will boost investors’ confidence.

Currently, Ameriprise’s shares retain a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. Also, considering the fundamentals, we are maintaining a long-term “Neutral” recommendation on the stock.

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