Stock Analysis

Franklin Resources (NYSE:BEN) Has Announced A Dividend Of US$0.29

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Franklin Resources, Inc. (NYSE:BEN) has announced that it will pay a dividend of US$0.29 per share on the 15th of July. This makes the dividend yield 4.9%, which will augment investor returns quite nicely.

Check out our latest analysis for Franklin Resources

Franklin Resources' Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Franklin Resources was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 19.8%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 43%, which we are pretty comfortable with and we think is feasible on an earnings basis.

NYSE:BEN Historic Dividend June 21st 2022

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from US$0.33 in 2012 to the most recent annual payment of US$1.16. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Franklin Resources May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings have grown at around 3.3% a year for the past five years, which isn't massive but still better than seeing them shrink. If Franklin Resources is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

In Summary

Overall, a consistent dividend is a good thing, and we think that Franklin Resources has the ability to continue this into the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Franklin Resources you should be aware of, and 1 of them makes us a bit uncomfortable. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

What are the risks and opportunities for Franklin Resources?

Franklin Resources, Inc. is a publicly owned asset management holding company.

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  • Trading at 12.6% below our estimate of its fair value


No risks detected for BEN from our risks checks.

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