On Monday, Franklin Resources Inc. (BEN) enhanced its quarterly common stock dividend by 7% to 29 cents per share. The dividend will be paid on December 31 to shareholders of record as of December 14, 2012.
This marks Franklin’s 32nd consecutive year of dividend increase, reflecting the company’s commitment to return value to shareholders with its strong cash generation capabilities. Prior to this, the company increased its dividend by 8% (from 25 cents to 27 cents per share) in December 2011.
In mid-November, Franklin announced the payment of a special cash dividend of 3 cents per share. This dividend will be paid on December 20 to shareholders of record as of December 6, 2012.
The dividend increase is part of Franklin’s long-term strategy to enhance shareholder value through prudent capital management. 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 $754 billion in assets under management (:AUM). The organization provides an array of global and domestic investment management solutions managed by Franklin, Templeton, Mutual Series, Fiduciary Trust, Darby and Bissett investment teams.
Early in November, 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.
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, 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 strong balance sheet. Moreover, the recently completed acquisitions are expected to strengthen its financial results. However, the regulatory restrictions and sluggish economic recovery could mar 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 a dividend increase will augur well for the company and help boost shareholders’ confidence, which might lead to positive estimate revisions. This, in turn, could cause an upgrade in the Zacks Rank.
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