Stock Analysis

Franklin Resources (NYSE:BEN) Is Increasing Its Dividend To US$0.29

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NYSE:BEN
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Franklin Resources, Inc. (NYSE:BEN) will increase its dividend on the 14th of January to US$0.29. This takes the dividend yield to 3.4%, which shareholders will be pleased with.

See our latest analysis for Franklin Resources

Franklin Resources' Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, Franklin Resources' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 5.5% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 38%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

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NYSE:BEN Historic Dividend December 18th 2021

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The first annual payment during the last 10 years was US$0.33 in 2011, and the most recent fiscal year payment was US$1.16. This means that it has been growing its distributions at 13% per annum over that time. Franklin Resources has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend's Growth Prospects Are Limited

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. However, Franklin Resources has only grown its earnings per share at 3.5% per annum over the past five years. While growth may be thin on the ground, Franklin Resources could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On Franklin Resources' Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Franklin Resources (of which 1 is a bit concerning!) you should know about. We have also put together a list of global stocks with a solid dividend.

What are the risks and opportunities for Franklin Resources?

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

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Rewards

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

Risks

No risks detected for BEN from our risks checks.

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