Recently, Franklin Resources Inc. BEN hiked its quarterly common stock dividend by 4% from the prior-quarter payout to 28 cents per share. The new dividend will be paid on Jan 15, 2021, to shareholders of record as of Dec 31, 2020.
Prior to this hike, the company had raised its dividend by 4% to 27 cents per share last December.
The company has been raising dividends annually for more than four decades now, with the current being Franklin’s 41st consecutive hike. The latest move reflects its commitment toward returning value to shareholders with its solid cash-generation capabilities.
Such capital-deployment activities are part of Franklin’s long-term strategy to boost shareholder value. It also includes investment in profitable businesses, while sustaining financial stability and flexibility.
Based in San Mateo, CA, Franklin is a global investment management organization operating as Franklin Templeton Investments, with $1.5 trillion in assets under management (AUM). The organization provides an array of global and domestic investment management solutions.
Last week, the company reported preliminary AUM by its subsidiaries of $1.47 trillion for November. Results displayed a 5.8% increase from the $1.39 trillion recorded as of Oct 31, 2020.
Considering closing price of $24.75 per share, the dividend yield is currently valued at 4.5%. The yield is moderately impressive when compared with the industry average of 1.61%. Also, this yield is not only attractive for income investors but it also represents a steady income stream.
Additionally, Franklin has a share-repurchase plan in place. In April 2018, the company announced repurchase authorization of up to 80 million shares. As of Sep 30, 2020, 30.7 million shares were available for repurchase under this authorization.
While Franklin looks promising based on regular rise in dividend and share buybacks, one must take a look at its fundamentals and financial performance before taking any investment decision.
Prudent Expense Management: Though the company recorded a 2% and 7% rise in operating expenses in fiscal 2018 and 2020, respectively, on potential investments in technology, expenses were stable in fiscal 2019. Furthermore, it recorded 7%, 14% and 3% decline in operating expenses in fiscal 2015, 2016 and 2017, respectively. Notably, management expects expenses of $3.7 billion with general and administrative expenses of $485 million in fiscal 2021.
Post addition of two months of Legg Mason, the company is on track to realize $300 million of gross synergies with 85% of run rate savings expected to be realized by the end of fiscal 2021.
Leverage: Franklin’s debt/equity ratio comes in at 0.40 against the S&P 500 average of 0.70, reflecting lower debt burden. It highlights the company’s sound financial flexibility.
Superior Return on Equity (ROE): Franklin’s ROE of 12.15%, as compared with the industry average of 11.73%, underlines the company’s commendable position over its peers.
Zacks Rank: The Zacks Consensus Estimate for earnings has been revised 4.6% downward for fiscal 2021, over the past 60 days. Franklin currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Share Price Movement: Franklin’s shares have gained 9.7% in the past six months, underperforming 20.9% growth recorded by the industry.
Some other finance stocks which have raised their dividends during the current quarter include Capital City Bank Group, Inc. CCBG, Glacier Bancorp, Inc. GBCI and First Financial Corporation THFF. Capital City Bank raised its quarterly dividend by 7.1%, while Glacier Bancorp increased by 3.4%. Also, First Financial has announced a 1.9% hike in common stock dividend.
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Franklin Resources, Inc. (BEN): Free Stock Analysis Report
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