On Tuesday, Franklin Resources Inc. (BEN) hiked its quarterly common stock dividend by 20% from the prior quarter payout to 12 cents per share. The new dividend will be paid on Jan 10, 2014 to shareholders of record as of Dec 31, 2013.
The latest move is Franklin’s 34th 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 3% after the stock split to 10 cents per share in Sep 2013.
Notably, in Jun 2013, Franklin announced a 3-for-1 stock split, which was paid as stock dividend on Jul 25, 2013 to common shareholders of record as of Jul 12, 2013. Therefore, the recent hike in dividend is the second increase after the stock split.
Moreover, Franklin’s board of directors announced authorization of 30 million shares of its common stock in either open market or off-market transactions. Notably, this authorization is an addition to about 9.7 million shares of common stock that are available for repurchase under the company’s existing common stock buyback program, which is not subject to an expiry date as of Nov 30, 2013.
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, California, Franklin is a global investment management organization operating as Franklin Templeton Investments with about $871 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, 2013, the company paid roughly $882.7 million in dividends to common shareholders. Cash and cash equivalents, along with investments at the end of the period were $8.6 billion. Moreover, the company repurchased common stock worth $491 million in the same period.
Earlier this week, the company declared preliminary AUM of $870.6 billion by its subsidiaries for Nov 2013. The company’s results witnessed a marginal increase from $869.0 billion in the prior month. Moreover, it surged 13.2% from $768.8 billion as of Nov 30, 2012.
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 the announcement of a dividend increase will augur well for the company and help boost shareholders’ confidence. However, regulatory restrictions and sluggish economic recovery could limit AUM growth and increase costs. Additionally, higher expenses remain a concern.
Franklin currently carries a Zacks Rank #3 (Hold). Some better-ranked investment managers include Waddell & Reed Financial, Inc. (WDR), Virtus Investment Partners, Inc. (VRTS) and Artisan Partners Asset Management Inc. (APAM). All these stocks have a Zacks Rank #1 (Strong Buy).
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