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Ameriprise Financial Services (AMP) is a Top Dividend Stock Right Now: Should You Buy?

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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Ameriprise Financial Services in Focus

Headquartered in Minneapolis, Ameriprise Financial Services (AMP - Free Report) is a Finance stock that has seen a price change of -4.49% so far this year. The financial services company is currently shelling out a dividend of $1.04 per share, with a dividend yield of 2.61%. This compares to the Financial - Investment Management industry's yield of 1.74% and the S&P 500's yield of 1.64%.

Taking a look at the company's dividend growth, its current annualized dividend of $4.16 is up 9.2% from last year. In the past five-year period, Ameriprise Financial Services has increased its dividend 5 times on a year-over-year basis for an average annual increase of 9.42%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Ameriprise's current payout ratio is 25%. This means it paid out 25% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, AMP expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $16.35 per share, with earnings expected to increase 1.55% from the year ago period.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide a quarterly payout.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, AMP is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).


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