Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Ameriprise Financial, Inc. (NYSE:AMP) is about to go ex-dividend in just two days. The ex-dividend date is usually set to be one business day before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least one business day to settle. In other words, investors can purchase Ameriprise Financial's shares before the 9th of November in order to be eligible for the dividend, which will be paid on the 27th of November.
The company's next dividend payment will be US$1.70 per share, on the back of last year when the company paid a total of US$6.80 to shareholders. Based on the last year's worth of payments, Ameriprise Financial has a trailing yield of 1.3% on the current stock price of US$509.32. If you buy this business for its dividend, you should have an idea of whether Ameriprise Financial's dividend is reliable and sustainable. As a result, readers should always check whether Ameriprise Financial has been able to grow its dividends, or if the dividend might be cut.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Ameriprise Financial has a low and conservative payout ratio of just 15% of its income after tax.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
See our latest analysis for Ameriprise Financial
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Ameriprise Financial has grown its earnings rapidly, up 31% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Ameriprise Financial has delivered an average of 9.8% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
From a dividend perspective, should investors buy or avoid Ameriprise Financial? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Ameriprise Financial ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
While it's tempting to invest in Ameriprise Financial for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 1 warning sign for Ameriprise Financial and you should be aware of this before buying any shares.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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