On Wednesday, Franklin Resources Inc. (BEN) hiked its quarterly common stock dividend by 25% from the prior quarter payout to 15 cents per share. The new dividend will be paid on Jan 9, 2015 to shareholders of record as of Dec 31, 2014.
The latest move is Franklin’s 35th consecutive dividend increase. This reflects the company’s commitment to return value to shareholders with its strong cash generation capabilities. Prior to this, the company increased its dividend by 20% to 12 cents per share in Dec 2013.
Moreover, Franklin’s board of directors announced a special cash dividend of 50 cents per share, which will be paid along with the regular dividend on Jan 9.
Such capital deployment activities are part of Franklin’s long-term strategy to enhance shareholder value. The strategy also includes investment in profitable businesses while sustaining financial stability and flexibility.
Based in San Mateo, CA, Franklin is a global investment management organization operating as Franklin Templeton Investments with about $898.4 billion in assets under management (AUM). The organization provides an array of global and domestic investment management solutions under 7 brands: Franklin Templeton, Mutual Series, Bissett, Fiduciary Trust, Darby, Balanced Equity Management and K2.
Despite stiff market competition, Franklin has significant long-term upside potential. Based on its disciplined and cautious approach, Franklin makes investments in the public equity and fixed income markets across the globe through its subsidiaries.
In the fiscal year ended Sep 30, 2014, the company paid roughly $290.4 million in dividends to common shareholders. Cash and cash equivalents, along with investments at the end of the period were $9.7 billion. Moreover, the company repurchased common stock worth $622.2 million in the same period.
Last month, the company declared preliminary AUM of $898.4 billion by its subsidiaries for Oct 2014. The company’s AUM exhibited a slight increase from $898 billion as of Sep 30, 2014. Further, it grew 3.4% from $868.9 billion as of Oct 31, 2013.
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 though the announcement of a dividend increase as well as special dividend will augur well for the company and help boost shareholders’ confidence, regulatory restrictions and sluggish economic recovery could limit AUM growth and increase costs.
Franklin currently carries a Zacks Rank #4 (Sell). Some better-ranked investment managers include Monroe Capital Corporation (MRCC) and KKR & Co. L.P. (KKR) with a Zacks Rank #1 (Strong Buy), while Noah Holdings Limited (NOAH) carries a Zacks Rank #2 (Buy).
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