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AMP’s dividend yield expands

Diversified financial services company AMP (ASX: AMP) has seen a sharp fall in its share price in the last month from a two year high of $5.79 to $4.90. At current prices, AMP is trading on a historic price-to-earnings multiple of 19.9 times — this is not cheap unless you believe the stock market can rally a lot further in the near term; however given the company’s diversified earnings streams and extensive network the business enjoys, it is arguably not overpriced either.

The dividend yield has improved as a result of the recent share price fall to 5.1%, which makes AMP’s dividend look relatively attractive compared with its peer group. Financial service peers such as Perpetual (ASX: PPT), IOOF Holdings (ASX: IFL) and Platinum Asset Management (ASX: PTM) are trading on dividend yields of 2.3%, 5% and 3.9% respectively.

Foolish takeaway

Even after the recent drop in S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) the overall funds under management and advice (FUMA) of financial service providers will not have dramatically altered when considered based on their average FUMA. Investors who look through this short-term volatility may find they have the opportunity to purchase leading financial service providers at enticing valuations and paying reasonable dividend yields.

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Motley Fool contributor Tim McArthur owns shares in Perpetual.

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