Today, Investment U’s Income Expert, Marc Lichtenfeld, takes a look at AllianceBernstein’s dividend safety.
AllianceBernstein (NYSE: AB) is an investment management firm with $643 billion in assets under management. It offers mutual funds, closed-end funds, managed accounts, sell-side research, institutional trading and other services.
Based on the current quarter’s distribution, it yields a robust 9%. But can this respected finance firm maintain its distribution?
The simple answer is “probably not.” But not because it’s experiencing financial difficulty.
AllianceBernstein has a variable distribution policy. The company is set up as a partnership, so it pays a distribution, not a dividend.
As you can see, over the last 10 years, the quarterly distribution has ranged from a low of $0.12 to a high of $0.85.
AllianceBernstein Dividend Safety Overview
So investors shouldn’t expect the same payout every quarter. Additionally, the February distribution tends to be the highest of the year, so the one paid in May is likely to be lower.
As a partnership, AllianceBernstein pays out all or nearly all of its profits in distributions.
Normally, when examining a company’s payout ratio, I use cash flow or a version of cash flow specific for the industry to calculate dividend safety.
In AllianceBernstein’s case, I’m using net income because that is the main metric that it reports.
Last year, the company made $242 million, which was less than the $258 million from the prior year. It paid out 91% of its profits in distributions.
This year, net income is expected to rise, which is positive for income investors.
I wouldn’t be surprised to see investors get paid more in the next 12 months than they did in the previous year. Although, with a variable distribution policy, that is hardly a sure thing.
You can almost definitely count on a lower distribution next May than what will be paid next February.
The company appears healthy, and I don’t expect a significant slash to the distribution. But investors should be aware that the quarterly payout is not consistent and will be lower in some quarters and years.
Dividend Safety Rating: D
AllianceBernstein’s dividend safety is not safe at the moment. And for the latest dividend updates, sign up for the Wealthy Retirement e-letter below. Wealthy Retirement’s team of experts will help you find your path to the retirement you deserve.
About Marc Lichtenfeld
Marc Lichtenfeld is the Chief Income Strategist of Investment U’s publisher, The Oxford Club. He has more than three decades of experience in the market and a dedicated following of more than 500,000 investors.
After getting his start on the trading desk at Carlin Equities, he moved over to Avalon Research Group as a senior analyst. Over the years, Marc’s commentary has appeared in The Wall Street Journal, Barron’s and U.S. News & World Report, among other outlets. Prior to joining The Oxford Club, he was a senior columnist at Jim Cramer’s TheStreet. Today, he is a sought-after media guest who has appeared on CNBC, Fox Business and Yahoo Finance.
Marc shares his financial advice via The Oxford Club’s free daily e-letter called Wealthy Retirement and a monthly, income-focused newsletter called The Oxford Income Letter. He also runs four subscription-based trading services: Technical Pattern Profits, Penny Options Trader, Oxford Bond Advantage and Predictive Profits.
His first book, Get Rich with Dividends: A Proven System for Earning Double-Digit Returns, achieved bestseller status shortly after its release in 2012, and the second edition was named the 2018 Book of the Year by the Institute for Financial Literacy. It has been published in four languages. In early 2018, Marc released his second book, You Don’t Have to Drive an Uber in Retirement: How to Maintain Your Lifestyle without Getting a Job or Cutting Corners, which hit No. 1 on Amazon’s bestseller list. It was named the 2019 Book of the Year by the Institute for Financial Literacy.
