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Franklin (BEN) Cheers Investors With 4% Quarterly Dividend Hike

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Franklin Resources, Inc.’s (BEN - Free Report) board of directors has announced a sequential hike in the quarterly dividend by around 4%. The company will now pay a dividend of 29 cents per share, up from 28 cents paid out in the prior quarter. The increased dividend will be paid out on Jan 14 to shareholders of record as of Dec 31, 2021.

Based on the increased rate, the annual dividend came to $1.16 a share, resulting in an annualized yield of 3.4%, considering the company’s closing price of $33.7 as of Dec 14.The company has hiked its dividend every year since 1981. In December 2020, it had increased the dividend by 3.7% to 28 cents per share.

The company has a share-repurchase authorization in place. It repurchased 7.3 million shares for $208.2 million in fiscal 2021 (ended Sep 30, 2021). As of Sep 30, 2021, 30.9 million shares remained to be repurchased under the authorization of 80 million shares approved in April 2018. Thus, such efficient capital deployment actions might enhance shareholder value and confidence in the stock.

The stock looks attractive based on the regular rise in the dividend income. Now let’s check out Franklin’s fundamentals and financial performance before taking any investment decision.

Inorganic Expansion Moves: In the past few years, Franklin has grown through acquisitions, thereby, enhancing its foothold. In November, in a bid to bulk up its offerings in the alternative investment space, the company inked an agreement to acquire Lexington Partners, complementing its existing prowess in real estate, private credit, and hedge fund strategies.

In October, it announced the acquisition of O’Shaughnessy Asset Management, LLC, further enhancing its presence in the separately managed account (SMA) space. Such efforts will support the company in improving and expanding its alternative investments and multi-asset solution platforms, thereby, providing world-class investment solutions to clients.

Assets Under Management (AUM) Growth: Franklin’s AUM is witnessing a rising trend, with a CAGR of 19.4% over the last five years (ended fiscal 2021). Though the company’s net outflows persist, the Legg Mason acquisition and several other efforts are likely to keep supporting AUM growth. This, in turn, will support the company’s top-line expansion.

Stock Seems Undervalued: Franklin’s stock looks undervalued with respect to its price-to-sales (P/S) and price-to-earnings (P/E) ratios. It has a P/E ratio of 9.64 compared with the industry average of 11.84. Also, the P/S ratio of 2.04 is below the industry average of 3.23.

Rising Expenses: Mounting non-interest expenses are concerning for the company. Over the last four years (ended fiscal 2021), expenses witnessed a CAGR of 16.2%. Leveraging on technological advancements might result in cost upsurges and weigh on the firm’s bottom-line expansion.

Our Take

Based on the above-mentioned factors, it seems to be a wise decision to hold Franklin stock in your investment portfolio.

In addition, the Zacks Consensus Estimate for earnings has been revised upward marginally for fiscal 2022 and 2023, respectively, over the past 30 days. Further, the company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The company’s shares have gained 6.5% in the past three months, outperforming the industry’s rise of 0.1%.


Zacks Investment ResearchImage Source: Zacks Investment Research


Other Companies Undertaking Similar Action

Over the past few months, several banks have rewarded shareholders with dividend hikes. Some of these are Farmers National Banc Corp. (FMNB - Free Report) , Saratoga Investment Corp. (SAR - Free Report) and Bank OZK (OZK - Free Report) .

Farmers National announced a sequential hike in the quarterly dividend of 27.3% to 14 cents per share. The dividend will be paid out on Dec 31 to shareholders of record as of Dec 10, 2021.

This marks the 6th consecutive quarter of an increase by Farmers National. Prior to this, FMNB had hiked the dividend by 10% to 11 cents per share. Farmers National’s management noted, “since 2015, our annual cash dividend has increased at an impressive 26% compound annual growth rate, reflecting our strong financial results and commitment to returning capital to shareholders.”

Saratoga Investment’s board of directors has announced a 1.9% sequential hike in the dividend for the fiscal third quarter ended Nov 30, 2021. SAR will now pay a dividend of 53 cents per share, up from 52 cents paid out in the prior quarter.

The increased dividend will be paid out on Jan 19 to shareholders of record as of Jan 4, 2022. This marks Saratoga Investment’s fourth dividend hike in fiscal 2022.

Bank OZK declared a quarterly cash dividend of 29 cents per share, reflecting a rise of 1.8% from the prior payout. The dividend was paid out on Oct 22 to shareholders of record as of Oct 15, 2021.

This was the 45th consecutive quarter of a dividend hike by Bank OZK. Prior to this, the company had hiked its dividend by 1.8% to 28.5 cents per share in July.