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The last five years have been favorable for stocks; although the return of the S&P 500 index year-to-date is negative at -2.78 %, one-year return of the index is at 19.06%. Furthermore, the average annual return for the last three years is at 10.86%, and the average annual return for the last five years is at 15.65%.

A Ranking system sorts stocks from best to worst based on a set of weighted factors. Portfolio123 has a powerful ranking system which allows the user to create complex formulas according to many different criteria. They also have highly useful several groups of pre-built ranking systems, I used one of them the "Balanced4" in this article.

The "Balanced4" ranking system is quite complex, and it is taking into account many factors like; EPS consistency, technical analysis, valuation, profitability ratios and dividend information, as shown in the Portfolio123's chart below.

In order to find out how such a ranking formula would have performed during the last 15 years, I ran a back-test, which is available by the Portfolio123's screener. For the back-test, I took all the 7,014 stocks in the Portfolio123's database.

The back-test results are shown in the chart below. For the back-test, I divided the 7,014 companies into fifty groups according to their ranking. The chart clearly shows that the average annual return has a very significant positive correlation to the "Balanced4" rank. The highest ranked group with the ranking score of 98-100, which is shown by the dark blue column in the chart, has given by far the best return, an average annual return of about 23%, while the average annual return of the S&P 500 index during the same period was about 2.5% (the red column at the left part of the chart). Also, the second and the third group (scored: 96-98 and 94-96) have given superior returns. This brings me to the conclusion that the ranking system is very useful.

After running the "Balanced4" ranking system on the companies which are included in the S&P 500 index and pay a dividend with a higher than 1% yield, on February 09, I discovered the ten best dividend stocks, which are shown in the charts below. In this article, I describe the first stock of the list Ameriprise Financial, Inc. (NYSE:AMP).

(click to enlarge)

(click to enlarge)

Source: Portfolio123

Ameriprise Financial, Inc.

Ameriprise Financial is a leading diversified financial services firm with more than $700 billion in assets under management and administration. Through its extensive wealth management and asset management capabilities, it advises, manages and protects the assets and income of more than two million individual, small business and institutional clients. Ameriprise Financial completed its spinoff from American Express on September 30, 2005, and began trading on the New York Stock Exchange on October 3 under the symbol AMP.

On February 04, Ameriprise Financial reported its fourth-quarter financial results, which beat EPS expectations by $0.06. The company reported fourth quarter 2013 net income of $298 million, or $1.47 per diluted share. Operating earnings were $378 million, up 3% from a year ago, with operating earnings per diluted share up 9% to $1.87. Operating net revenues increased 8% to $2.8 billion, driven by strong fee-based business growth from client net inflows and increased client activity, as well as market appreciation, which more than offset the pressure from continued low interest rates. Excluding the impact of continued low interest rates, operating net revenues grew 10% compared to a year ago.

In the quarter, the company returned $475 million to shareholders through share repurchases and dividends. For the full year, $1.9 billion was returned to shareholders.

AMP's results reflect an impressive year. Total assets under management and administration grew 13% from a year ago to $771 billion driven by Ameriprise advisor client net inflows and market appreciation. Ameriprise advisor client assets grew 16% to a record $409 billion and total wrap assets increased 23% to $154 billion. Wrap net inflows in the quarter remained strong at $2.8 billion. Advisor productivity continues to improve; operating net revenue per advisor, excluding results from former banking operations, grew 14% to $116,000 for the quarter.

AMP has established aggressive financial growth goals, including annual average revenue growth of 6% to 8%, diluted operating EPS growth of 12% to 15%, and return on equity of 12% to 15%.

Now let's look at the numbers. According to Yahoo Finance, AMP's next financial year forward P/E is at 11.92 and the average annual earnings growth estimates for the next 5 years is at 19.80%, these give an extremely low PEG ratio of 0.60, one of the lowest among all S&P 500 stocks. The PEG Ratio - price/earnings to growth ratio - is a widely used indicator of a stock's potential value. It is favored by many investors over the P/E ratio because it also accounts for growth. A lower PEG means that the stock is more undervalued.

The company has been paying uninterrupted dividends since February 2007. The forward annual dividend yield is at 2.08%, and the payout ratio is only 30%. The annual rate of dividend growth over the past three years was extremely high at 40.58% and over the past five years was also very high at 25.71%. I consider that besides dividend yield, the consistency and the rate of raising dividend payments are the most crucial factors for dividend-seeking investors, and AMP's performance has been impressive in this respect.

The Advice & Wealth Management and Asset Management segments should be growth drivers for the company's sales and operating earnings. Ameriprise has about 10,000 advisers, one of the largest adviser sales forces in the U.S. and has recruited 80 experienced advisors during the last quarter. With robust client net inflows and healthy growth in advisor productivity, the company has an excellent chance to fulfill its aggressive growth program.

Conclusion

Ameriprise Financial has recorded strong revenue, EPS and dividend growth, and it has compelling valuation metrics and strong earnings growth prospects. AMP has established aggressive financial growth goals, including annual average revenue growth of 6% to 8%, diluted operating EPS growth of 12% to 15%, and return on equity of 12% to 15%. AMP is generating strong free cash flows and returns value to its shareholders by stock buyback and by increasing dividend payments. For full-year 2013, the company returned $1,892 million to shareholders through share repurchases $1,481 million and dividends $411 million.

All these factors lead me to the conclusion that AMP stock is a smart long-term investment.

Source: S&P 500 Best Dividend Stocks According To A Winning Ranking System