Last week, Franklin Resources Inc. (BEN) announced a special cash dividend of $3.00 per share for its shareholders. This dividend will be paid on December 20, 2012 to shareholders of record as of December 6.
The dividend announcement is part of Franklin’s long-term strategy to enhance shareholder value through tactical capital management. The strategy also includes investment in profitable businesses while sustaining financial stability and flexibility.
Prior to this announcement, the company paid regular quarterly dividend of 27 cents per share on October 12, 2012, reflecting the company’s commitment to return value to shareholders with its strong cash generation capabilities.
The company increased its dividend by 8% (from 25 cents to 27 cents per share) in December 2011. Concurrently, Franklin announced the payment of special cash dividend of $2.00 per share. The special dividend was paid in addition to the new dividend.
Based in San Mateo, California, Franklin is a global investment management organization operating as Franklin Templeton Investments with about $754 billion in assets under management (:AUM). The organization provides a broad array of global and domestic investment management solutions managed by Franklin, Templeton, Mutual Series, Fiduciary Trust, Darby and Bissett investment teams.
Recently, the company declared preliminary AUM of $753.9 billion by its subsidiaries for the month of October 2012. The company’s results witnessed a rise of 0.5% from $749.9 billion as of September 30, 2012. Moreover, it bolstered 8.6% from $694.1 billion as of October 31, 2011. Among its peers, Legg Mason Inc. (LM) and Invesco Ltd. (IVZ) experienced a decline in AUM in October.
On a quarterly basis, as of September 30, 2012, total AUM was $749.9 billion, up from $707.1 billion as of June 30, 2012, driven by market appreciation of $40.8 billion and net new flows of $2.9 billion. Simple monthly average AUM of $726.7 billion during the quarter climbed 2% sequentially. Net new flows were $2.9 billion versus $4.8 billion in the prior quarter.
Despite active competition, the company has a significant long-term upside potential. Based on its disciplined risk-aware investment approach, Franklin makes investments in the public equity and fixed income markets across the globe through its subsidiaries.
In fiscal 2012 ending September 30, 2012, the company paid roughly $663 million in dividends to common shareholders. Cash and cash equivalents along with investments exiting the year were $10.7 billion. Moreover, the company repurchased common stock worth $797.4 million during fiscal 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 sturdy balance sheet. Moreover, the recently completed acquisitions are expected to strengthen its financial results. However, the regulatory restrictions and sluggish economic recovery could mar the AUM growth and increase costs.
Franklin currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We believe the announcement of special dividend will be an appropriate step for the company in boosting shareholders’ confidence, which might lead to positive estimate revisions. This, in turn, could cause an improvement in the Zacks Rank.
Among others, California-based City National Corporation (CYN) announced a special cash dividend of 25 cents per share, which will be paid on December 18, 2012 to stockholders of record as on December 3.
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