Stock Analysis

Franklin Resources (NYSE:BEN) Will Pay A Dividend Of US$0.29

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NYSE:BEN
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Franklin Resources, Inc.'s (NYSE:BEN) investors are due to receive a payment of US$0.29 per share on 14th of April. The dividend yield will be 4.1% based on this payment which is still above the industry average.

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Franklin Resources' Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Franklin Resources was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to fall by 12.7% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 39%, which we are pretty comfortable with and we think is feasible on an earnings basis.

historic-dividend
NYSE:BEN Historic Dividend March 22nd 2022

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The first annual payment during the last 10 years was US$0.33 in 2012, 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. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings has been rising at 4.5% per annum over the last five years, which admittedly is a bit slow. 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, we think Franklin Resources is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for Franklin Resources that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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