Owners of AMP Ltd (ASX: AMP) shares have been showered with cash returns over the last couple of years following the sale of AMP Capital. But there's no guarantee that dividend payments will continue.
AMP sold AMP Capital in August 2022, and since then, it has returned $1.1 billion to investors through a mixture of on-market share buybacks and dividends.
Now this program is completed, investors may be wondering if AMP will continue sending cash to shareholders or if that's it.
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Dividend expectations
In the capital return completion ASX announcement, AMP said that the capital return program comprised "on-market share buybacks and the recommencement of dividends". To me, a "recommencement of dividends" suggests there's a good chance the dividends will continue. I don't think it would be a popular move with shareholders to end dividend payments again.
Of course, passive income is not guaranteed. Dividend payments are decided by the company's board of directors, who consider profitability, balance sheet, future cash requirements, and other factors.
As my colleague Bernd Struben reported, experts think the ASX financial share will continue to generate cash flow for shareholders.
Peter Day from Sequoia Wealth Management said on The Bull:
AMP had reduced shares on issue by 20% between August 2022 and June 2024. It had reduced debt by $191 million in the first half of fiscal year 2024.
The shares have risen from 93 cents on January 2 to trade at $1.33 on October 3. After the [share] buy-back finishes, we expect the company to focus on re-establishing a dividend payout ratio at the 2024 full-year result.
Other analysts also believe that owners of AMP shares will continue to receive dividends.
Indeed, the forecast on Commsec for FY25 suggests shareholders could get the biggest payout in years. The prediction on Commsec shows an annual payout of 7 cents per share for the 2025 financial year, which would translate into a dividend yield of 5.25%, excluding any potential franking credits.
The earnings per share (EPS) per share prediction on Commsec is 11.4 cents, implying the dividend payout ratio would be approximately 60%. That profit generation would also mean the current AMP share price is valued at under 12x FY24's estimated earnings.
Broker UBS is not quite as bullish, but it does still expect ongoing AMP dividend payments. In FY25, UBS is projecting that AMP can generate 10 cents of EPS and pay a dividend per share of 6 cents. This payout would translate into a forward dividend yield of 4.5%, excluding franking credits.
Regardless of the size of the dividend, it appears the experts are confident of ongoing passive income payments from AMP.
