Ameriprise: Baby Boomer Buy

09/29/2014 8:00 am EST


Charles Carlson

Editor, DRIP Investor

An aging populace means larger numbers of people relying on retirement savings and investments to pay the bills and see themselves through those golden years, observes Chuck Carlson, editor of DRIP Investor.

One firm nicely positioned to capitalize on this increased focus on retirement is Ameriprise Financial (AMP).

Ameriprise has a nationwide network of some 10,000 financial advisors offering a variety of investment, insurance, and financial planning services.

Ameriprise is nicely diversified in the advisory and wealth-management areas. Its target market is households with more than $100,000 of investable assets.

The firm posted nice growth numbers in the second quarter. Operating net revenue rose 8% in the quarter on a 31% increase in operating earnings per share.

The firm also experienced inflows for the quarter. One key metric is productivity per advisor. On a trailing 12-month basis, operating net revenue per advisor, excluding results from former banking operations, grew 14% to $468,000.

The company has done a good job of returning capital to shareholders. In the quarter, the firm repurchased 3.2 million shares, while boosting the dividend more than 11% earlier this year to $0.58 per quarter. The current yield is a decent 1.9%.

Ameriprise trades at less than 15 times the 2014 consensus earnings estimate of $8.41 per share and 13 times the 2015 consensus estimate of $9.48.

Those are reasonable valuations for a company posting healthy growth. To be sure, the firm’s ties to the stock market will depress the earnings multiple a bit. Still, long-term demographic trends should help drive earnings and dividend growth.

The top and bottom lines are growing at healthy rates and record per-share profits are likely this year and next. Investors who want good growth at a still reasonable valuation should consider these shares.

We also note that Ameriprise has never split its stock, so a stock split from current levels would not be surprising.

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