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Is the AMP share price good value in 2020?

The AMP Limited (ASX: AMP) share price has been under pressure in 2019 – but could it bounce back next year?

The AMP share price in 2019

AMP shares fell lower at the start of the year as the 2018 Financial Services Royal Commission wrapped up, with the Aussie wealth manager bearing the brunt of Commissioner Kenneth Hayne’s attention throughout many of the rounds of hearings.

The AMP share price has dropped 65% since the start of March 2018 as Commissioner Hayne turned up the heat. The company’s share price is currently trading at $1.81 per share – a long way shy of its $3.35 52-week high.

AMP’s dividend yield climbed higher in 2019 to 7.73% per annum, purely due to the share price decline. The dividend yield is calculated as dividend per share divided by price per share – meaning AMP shares could appear better value than they are.

The company’s CEO and Chairman have both been replaced in the wake of the Commission, with the new CEO Francesco de Ferrari under pressure to right the AMP ship and its falling share price. Sweeping reforms of its financial planning business have become the cornerstone of his turnaround plans for AMP.

Where to next for AMP?

Many would see AMP’s 7.73% dividend yield as an automatic buy for income alone in 2020. However, given the weaker earnings profile, I wouldn’t be surprised to see an AMP dividend cut in the coming 12-18 months.

AMP did release its third-quarter trading update yesterday, which boosted the AMP shares 1.12% higher to $1.81 per share. AMP shares have also gained a tidy 13.13% in the last 2 weeks in a sign that times could be changing.

There are still lots of challenges ahead for AMP and its shareholders will need a lot of patience in 2020.

While AMP shares could be a tactical buy, I prefer Magellan Financial Group Ltd (ASX: MFG) shares as we enter next year.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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