Stock Analysis

Broadridge Financial Solutions (NYSE:BR) Is Increasing Its Dividend To $0.725

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NYSE:BR
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Broadridge Financial Solutions, Inc. (NYSE:BR) will increase its dividend from last year's comparable payment on the 5th of October to $0.725. This takes the annual payment to 1.7% of the current stock price, which is about average for the industry.

See our latest analysis for Broadridge Financial Solutions

Broadridge Financial Solutions' Payment Has Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Broadridge Financial Solutions was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

The next year is set to see EPS grow by 50.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 43%, which is in the range that makes us comfortable with the sustainability of the dividend.

historic-dividend
NYSE:BR Historic Dividend September 7th 2022

Broadridge Financial Solutions Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2012, the dividend has gone from $0.64 total annually to $2.90. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Broadridge Financial Solutions has seen EPS rising for the last five years, at 11% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. However, lack of cash flows makes us wary of the potential for cuts in the dividend's future, even though the dividend is generally looking okay. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 3 warning signs for Broadridge Financial Solutions you should be aware of, and 1 of them can't be ignored. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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About NYSE:BR

Broadridge Financial Solutions

Broadridge Financial Solutions, Inc. provides investor communications and technology-driven solutions for the financial services industry.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation1
Future Growth2
Past Performance2
Financial Health2
Dividends4

Read more about these checks in the individual report sections or in our analysis model.

Average dividend payer with questionable track record.