On Thursday, Franklin Resources Inc. (BEN - Analyst Report) enhanced its quarterly common stock dividend by 3% over the prior quarter to 10 cents per share. The dividend will be paid on Oct 11 to shareholders of record as of Sep 30, 2013.
This marks Franklin’s 33rd consecutive year of dividend increase, reflecting the company’s commitment to return value to shareholders with its strong cash generation capabilities. Prior to this, the company increased its dividend by 7% before the stock split (from 27 to 29 cents per share) in Dec 2012.
Notably, in Jun 2013, Franklin announced a 3-for-1 stock split, which was paid as stock dividend on Jul 25, 2013 to common stockholders of record as of Jul 12, 2013. Therefore, the recent hike in dividend is the first increase after the stock split.
The dividend increase is part of Franklin’s long-term strategy to enhance shareholder value through prudent capital management. The strategy also includes investment in profitable businesses while sustaining financial stability and flexibility.
Based in San Mateo, Calif., Franklin is a global investment management organization operating as Franklin Templeton Investments with about $817 billion in assets under management (AUM). The organization provides an array of global and domestic investment management solutions managed by Franklin, Templeton, Mutual Series, Fiduciary Trust, Darby and Bissett investment teams.
Despite active competition, the company has a significant long-term upside potential. Based on its disciplined and cautious investment approach, Franklin makes investments in the public equity and fixed income markets across the globe through its subsidiaries.
During the nine months ended Jun 30, 2013, the company paid roughly $821.1 million in dividends to common shareholders. Cash and cash equivalents along with investments ended the period were $6.1 billion. Moreover, the company repurchased common stock worth $226.4 million during the same period.
Earlier this week, the company declared preliminary AUM of $817.3 billion by its subsidiaries for Aug 2013. The company’s results witnessed a fall of 2% from $834.1 billion in the prior month. However, it bolstered 11.8% from $731 billion as of Aug 31, 2012. Among its peers, Legg Mason Inc. (LM - Analyst Report) and Invesco Ltd. (IVZ - Analyst Report) also experienced a decline of 1.8% and 3.4%, respectively, in AUM in August.
Franklin's global footprint is an exceptionally favorable strategic point as its AUM is well diversified. The company is also poised to benefit from its strong balance sheet. We believe the announcement of a dividend increase will augur well for the company and help boost shareholders’ confidence. However, regulatory restrictions and sluggish economic recovery could mar AUM growth and increase costs. Additionally, higher expenses remain a matter of concern.
Franklin currently carries a Zacks Rank #3 (Hold). However, a better performing company in the same industry with a Zacks Rank #2 (Buy) is Affiliated Managers Group Inc. (AMG - Analyst Report).