Waddell & Reed Financial, Inc. (WDR) gained almost 5% in yesterday’s trading session after it announced a dividend hike for the fourth-quarter 2014. The declared dividend of 43 cents per share reflected a 26.5% increase from the prior dividend of 34 cents.
The new dividend is payable on Feb 2, 2015 to shareholders of record as of Jan 12.
Based on Thursday’s closing price of $47.47, the annualized dividend yield comes to approximately 3.6%.
The latest move marks the company’s fifth-consecutive annual dividend hike, with a five-year compounded annual growth rate of 18%. The company had last raised its dividend by 21.4% to 34 cents in Dec 2013.
Waddell & Reed paid $86,754 as dividends to its shareholders so far this year. Including the share repurchase program, the company returned a total of $182,889 to its shareholders year-to-date.
Such capital deployment activities indicate the company’s strong balance sheet, capital generating strength as well as commitment toward enhancing its shareholder value.
Earnings Strength: The Key Driver
For the third quarter of 2014, Waddell & Reed reported earnings of 94 cents per share, beating the Zacks Consensus Estimate by 2 cents. The reported figure also came in 17.5% above the year-ago quarter.
This marks the company’s ninth-consecutive earnings surprise, with an average earnings beat of 6.34%.
Increasing expenses, a competitive landscape and sluggish economy are expected to keep the company’s financials under pressure going forward.
However, its strong balance sheet, cash position and sustained improvement in top line and AUM are expected to act as growth drivers in the future.
Dividend Hike by Others in this Space
Recently, Franklin Resources Inc. (BEN) and Associated Banc-Corp (ASBC) raised their quarterly dividends by 25% and 11.1%, respectively, whereas SEI Investments (SEIC) declared a 9% hike in its regular semi-annual dividend to 24 cents.
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