The AMP Limited (ASX: AMP) share price has gone through a major decline. It's down 20% since 15 February 2023, reversing its gains over the past year. It's now down around 80% over the past five years.
But, the company is finally generating a profit after a period of difficulty.
In the recent 2022 financial year result, it reported an underlying net profit after tax (NPAT) of $184 million and a statutory NPAT of $387 million, reversing a $252 million loss from FY21.
The company's progress with its transformation now has analysts thinking that it's going to start paying a regular and growing dividend.
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AMP dividend estimates
Commsec numbers currently suggest that AMP is going to pay a full-year dividend of 4.2 cents for the 2023 financial year. Excluding the effect of franking credits, this would be a yield of 4%. If it were to be fully franked, it'd be a grossed-up dividend yield of 5.7%.
In the 2024 financial year, Commsec numbers suggest AMP may then increase its dividend by 19% to 5 cents per share. This would be a 4.75% dividend yield, or 6.8% grossed-up if it were fully franked.
Then, in the 2025 financial year, the current forecast is that the dividend could grow by another 20% to 6 cents per share. At the current AMP share price, that would translate into a dividend yield of 5.7%, or 8.2% grossed-up if it were fully franked.
But, keep in mind that these are just projections and there's no guarantee that the dividends will be fully franked.
Earnings to rise?
AMP has done some strategic repricing in its wealth management businesses to offer a more competitive product for clients and their advisers.
This could be helpful for the business retaining and growing its client base.
AMP Bank also saw residential mortgage book growth of $2 billion over FY22. Growth of the mortgage book can help the bank's earnings, as long as the credit quality of the bank's borrowers remains strong during 2023 and beyond.
The ASX financial share also said that it has been disciplined with a focus on costs across the group. Controllable costs, excluding AMP Capital's discontinued operations, were reduced by $54 million
Commsec forecasts currently suggest that AMP shares could generate 7.1 cents of earnings per share (EPS). This puts the current forward price/earnings (P/E) ratio at 15.
By FY25, the company could make EPS of 10 cents – this would represent growth of around 40% from FY23 if that prediction comes true. While it's a long way away, the FY25 P/E ratio is 10.5.
Foolish takeaway
If AMP can do as well as analysts expect, then AMP shares may become a dividend machine from here. But, I'm not sure how much long-term growth AMP will be able to achieve beyond the next few years, so I'm not looking at it as an ultra-long-term idea.
Instead, I'd be looking at other ASX dividend shares for growth.
