One of the most important determinants of a business’ long-term success is the strength of its competitive advantage – the ‘secret sauce’ that differentiates it from its competitors and allows it to remain highly profitable through even the toughest economic environments.
Determining and measuring a company’s competitive advantages can be difficult. One of the most meaningful signs of a strong competitive advantage is a long history of steadily increasing dividends.
Why is that?
A company must have a durable and defensible competitive advantage to raise its dividend every year for many years. When a company has increased its annual dividend each year for many years, investors tend to take notice. Ameriprise Financial (AMP) is an example of this phenomenon.
In fact, Ameriprise Financial is a member of the Dividend Achievers, a group of shareholder-friendly companies that have increased their dividends for 10+ consecutive years.
Ameriprise Financial’s full dividend history can be seen below.
Source: YCharts
Note: Ameriprise Financial actually froze its dividend in 2009. Sure Dividend does not decide who is included in the Dividend Achievers Index, and it is unclear why Ameriprise qualifies for inclusion given its 2009 dividend freeze.
Ameriprise Financial’s above-average dividend yield and long dividend history helped it to rank as a Top 10 Stock in the most recent edition of the Sure Dividend newsletter.
This article will analyze the investment prospects of Ameriprise Financial in detail.
Business Overview
Ameriprise Financial is a U.S. financial planning leader with more than $800 billion of assets under management (AUM).
The company manages 112 four- and five-star Morningstar mutual funds and through its network of more than 9,000 advisors, delivers comprehensive financial planning services to 2+ million customers – primarily those with $500,000 to $5 million of investable assets.
Ameriprise was founded in 1894 as Investors Syndicate and was later acquired by American Express (AXP) in 1984. In 2005, the entity was spun-off to AMEX shareholders under the ticker AMP.
Ameriprise Financial operates in five segments:
For the sake of reporting financial performance, the Annuities and Protection segments are combined and the Corporate & Other segment is generally excluded to give the company three reporting segments.
Historically, Ameriprise’s Annuities & Protection segment has been its largest contributor to operating earnings, although this has changed in recent years thanks to the firm’s robust growth in its Advice & Wealth Management and Asset Management divisions. Each is described in more detail below.
Ameriprise Financial’s Advice & Wealth Management segment invests $479 billion of client assets, with more than $200 billion of this capital invested through fee-based, investment advisory assets (think registered investment advisors or RIAs).
Ameriprise’s Advice & Wealth Management segment differentiates itself by having strong brand recognition and high client satisfaction rates. Further, this business is economically attractive as almost 80% of the segment’s revenue is recurring in nature.
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