Broadridge Financial Solutions, Inc. ( BR Quick Quote 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 14.7% in the past year against 5% decline of the
industry it belongs to. Factors Supporting the Rally
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 is supplementing internal growth with strategic acquisitions. The February 2020 acquisition of FundsLibrary is expected to amplify its pan-European regulatory-communications and digital-data platform, supporting the lifecycle of fund data, documents as well as 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 it is rare to see firms raising dividends this year, Broadridge is among those handful that have come up as exceptions and continued rewarding shareholders with dividend hikes. The company increased its quarterly dividend rate by 6.5%, from 54 cents per share to 57.5 cents per share.
Broadridge has a track record of consistent dividend payment. During fiscal 2019, the company paid out cash dividends of $63.9 million. It paid out $211.2 million, $165.8 million and $152.2 million of dividends during fiscal 2019, 2018 and 2017, respectively.
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 clear the 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 better-ranked stocks in the broader Zacks
sector are Business Services TransUnion ( TRU Quick Quote TRU - Free Report) WEX Inc. ( WEX Quick Quote WEX - Free Report) and CoreLogic, Inc. ( CLGX Quick Quote CLGX - Free Report) . TransUnion and WEX carry a Zacks Rank #2 (Buy) currently while CoreLogic sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The long-term expected earnings per share (three to five years) growth rate for TransUnion, WEX and CoreLogic is 14%, 15% and 12% respectively.
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