Ameriprise Financial: Overlooked Winner – Seeking Alpha


Unlike most dividend paying stocks, Ameriprise Financial (NYSE:AMP) doesn’t trade anywhere close to recent highs. The company is under pressure with declining earnings expectations, but the stock took a considerable hit in relation to the earnings impact.

At $103, Ameriprise Financial still offers a 3% dividend and other yields. Sure some financial metrics aren’t overly impressive, but one big signal supports piling into this stock now.

Click to enlarge

The prime focus of the market is on the weak operating environment. For Q2, operating revenues declined by 4% and earnings missed expectations while future expectations are for more weakness going forward.

Along with revenues, Ameriprise Financial was able to cut operating expenses. The end result, the company still produces huge cash flows. As usual, the market is too focused on growing metrics over the ability to constantly produce stable cash flows for shareholders.

The key signal the financial planning firm provides investors is the massive net payout yields (net stock buyback yield + dividend yield). Not only does the company offer a 3.0% dividend yield, but also a huge stock buyback program.

In the last quarter, the $16 billion company repurchased 4.7 million shares and spent a total of $571 on capital returns when including the dividend payout. Ameriprise Financial only bought 3.4 million shares in the year ago period when the stock was considerably higher.

The end result is that the net payout yield has now surged to over 14%. The company has one of the highest yields in the market now as the lower price and constant spending on buybacks signals the value in the stock.

AMP Chart

AMP data by YCharts

The key investor takeaway is that the net payout yield signaled that Ameriprise Financial was good shape when the stock plunged below $90 earlier this year. Even now, investors are hard placed to find other stocks with this large of a yield. The stock remains one to hold in this market.

Disclosure: I am/we are long AMP.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion or consult a financial advisor. Investing includes risks, including loss of principal.


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