The FiveTwenty portfolio received $79.98 in dividends in the past week. ADM, JNJ, and WBA paid their quarterly dividend during the week.
|Past Week Dividend||$79.98|
|Current Quarter Dividend (Q4 2021)||$808.62|
|Estimated Annual Dividend||$3,695.25|
The capital allocation for the week of 12/12/2021 to 12/18/2021 will be used to establish a position in Franklin Resources (NYSE: BEN).
BEN – Company Profile
Franklin Resources (BEN) is an asset management holding company. Through its subsidiaries, better known as Franklin Templeton, the firm provides its services to individuals, institutions, pension plans, trusts, and partnerships. As of September 30, 2021 BEN had $1.53 trillion in assets under management. Official Site | Wikipedia
|Dividend Streak||41 years|
|Payout Ratio||29.95%* (reported 31.37%)|
|P/E||9.10* (reported 9.54)|
* computed using TTM adjusted EPS of $3.74 as of Q4 2021
Does BEN have the financial means to sustain and raise its dividend going forward?
BEN’s revenue and net income grew at CAGR of 5.95% and 7.36% respectively from 2011 to 2014. Both then declined sharply from 2014 to 2020 before rebounding sharply in FY 2021 with revenues reaching $8.4 billion and net incomes coming in at $1.7 billion. The acquisition of Legg Mason, which closed on July 31, 2020, was a major reason for the growth in FY 2021.
In the last 10 years, BEN’s adjusted EPS showed similar trends to revenues and net earnings. EPS grew between 2011 and 2014 and then proceeded to decline through 2020. FY 2021 saw a sharp rebound in EPS and adjusted EPS, with adjusted EPS being $0.05 away from the high mark set in 2014.
The average dividend per share growth rate was 14.6% per year in the past 10 years and 6.8% per year in the past 3 years. (per GuruFocus) The last 2 dividend raises in 2019 and 2020 have been more modest as EPS have come under pressure. With the strong financial performance in FY 2021 we expect the company to raise its dividend when it declares Q4 2021 dividend.
BEN in 2021 and beyond
Compared to recent years FY 2021 was a banner year for BEN. Revenues increased 51%, adjusted net income grew 46%, and adjusted EPS were 43% higher compared to FY 2020. During the same period AUM grew 8% on an end of year basis. This growth was a direct result of the company’s smart deployment of capital in acquiring Legg Mason.
As part of the Q4 and FY 2021 financial results press release, BEN also announced its intention to continue to diversify its assets and services portfolio through additional acquisitions. On 11/01/2021 the company announce a definitive agreement to acquire Lexington Partner L.P. The acquisition is expected to close by the end of Q2 2022. On 10/30/2021 BEN announced that it will acquire O’Shaughnessey Asset Management LLC. This transaction is expected to close by the end of Q1 2022.
Are we paying too much for BEN at the current share price?
In the last 10 years, BEN’s P/E ratio saw a low of 8.01 and a high of 39.2, with a median value of 13.79. (per GuruFocus) The current TTM P/E ratio of 9.10 on adjusted EPS and 9.54 on GAAP EPS is considerably lower than the median and not that far of from the low point.
The current share price of $34.05 is 4% above the 50-day moving average and 7.6% above the 200-day moving average. Additionally, the share price is at the 75th percentile of the 52 week trading range.
The share price has in recent days reversed the decline it experienced during the month of November.
How does the current dividend yield for BEN compare to historical values?
In the last 10 years, the dividend yield for BEN has been in a range of 0.67% to 6.79%, with a median of 1.78%. (per GuruFocus) The current TTM yield of 3.29% is materially higher than the historical median.
Given the strong current yield we believe BEN offers an attractive entry point for establishing our position.
Why are we adding BEN to the FiveTwenty portfolio?
BEN has a 41-year history of increasing its dividend payout. The company’s recent acquisitions have significantly boosted revenues, net income, and EPS and provided the company with significant head room to continue paying an increasing quarterly dividend. Based on TTM EPS the payout ratio for BEN is now at around 31%.
We are confident in the ability of BEN to continue it track record of rewarding its shareholder with growing dividends in the near future.
Photo by Giorgio Trovato on Unsplash