AMP has become the latest company to not let a fall in earnings deter it from lifting dividends.
The financial services group raised its first-half dividend by 9 per cent to 12.5c a share despite a 3 per cent drop in statutory earnings to $382 million.
Chief executive Craig Meller justified the move, arguing the group had lifted underlying earnings 16 per cent and the 73 per cent payout ratio was well within the company’s target policy of 70 to 80 per cent of underlying earnings.
The improved payout was welcomed by investors who pushed the stock 3.3 per cent higher in early trade to $5.70.
After years of lacklustre performance, AMP has returned to favour in recent months with a 16.5 per cent lift during the past year before trading began this morning, a performance that outstripped the broader market.
Like other industry players, AMP has been rocked by significant shifts in the life insurance division in the past two years as payouts escalated on income protection policies and as clients walked away from life policies.
That has resulting in substantial writedowns and several profit warnings.
Mr Meller says the division continues to face structural and cyclical change but that it had taken steps to improve customer retention and get those on income protection back to work faster.
“Improving the performance of the insurance business remains a key area of focus as we introduce a series of actions to improve the management of claims and customer retention in order to deliver benefits to both our customers and shareholders,” he said.
Mr Meller describes the result as solid, and says the company has made good progress on trimming costs, improving efficiency with better focus on customers.
“It is particularly pleasing to see AMP’s offshore strategy already delivering good cashflows while building strong growth potential in the long term from partnerships with national champions in China and Japan,” he added.
Scandals sweeping through parts of the financial planning industry appear to have worked in AMP’s favour with a strong lift in wealth management earnings rising 16 per cent to $183 million, boosted by a strong rebound in net cashflow and improved cost controls.
The company holds pole position in retail superannuation with 20 per cent of the market and 22 per cent of the financial advice market.