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Reasons to Hold Broadridge Financial (BR) in Your Portfolio

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Broadridge Financial Solutions, Inc. (BR - Free Report) has an impressive Growth Score of A. This style score condenses all the essential metrics from the company’s financial statements to get a true sense of the quality and sustainability of its growth.

The company’s shares have gained 11.9% year to date against the 12.6% decline of the industry it belongs to.

What’s Behind the Gain?

Broadridge’s robust business model ensures significant recurring-fee revenues, including contributions from net new business, internal growth, and acquisition-related synergies. In the fourth quarter of fiscal 2020, recurring-fee revenues of $930.2 million increased 14% year over year and contributed 68.3% to total revenues.

Broadridge has been supplementing internal growth with strategic acquisitions. The February 2020 acquisition of FundsLibrary can amplify its pan-European regulatory-communications and digital-data platform, supporting the lifecycle of fund data, documents, and regulatory reporting for the investment industry. The 2019 buyout of ClearStructure Financial Technology should expand its asset-management technology suite across private debt markets, and that of Fi360 should favor its Investor Communication Solutions segment.

Although many companies across diverse sectors have suspended dividend payouts amid the coronavirus crisis, Broadridge remains one of those few that are sailing through the tough economic time and maintaining dividend payouts as well. The company announced a quarterly cash dividend of 54 cents in May.

Broadridge has a track record of consistent dividend payment. During fiscal 2019, the company paid cash dividends of $63.9 million. It paid out $211.2 million, $165.8 million and $152.2 million of dividends during fiscal years 2019, 2018 and 2017, respectively.

Some Risks

Broadridge’s total debt to total capital ratio at the end of the fourth-quarter 2020, 0.57, is higher than the industry’s 0.37. A higher debt-to-capitalization ratio indicates increased risk of insolvency in challenging times.

Further, the company’s cash and cash equivalent balance of $477 million at the end of the quarter was well below the debt level of 1.79 billion, underscoring that the company doesn’t have enough cash to meet this debt burden. The cash level, however, can meet the short-term debt of $400 million.

Zacks Rank and Stocks to Consider

Broadridge currently carries a Zacks Rank #3 (Hold).

Some other top-ranked stocks in the broader Zacks Business Services sector are Republic Services (RSG - Free Report) , IQVIA Holdings (IQV - Free Report) and NV5 Global (NVEE - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term expected earnings per share (three to five years) growth rate for Republic Services, IQVIA Holdings and NV5 Global is 7.9%, 9.9% and 13.7%, respectively.

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