In an attempt to boost shareholder value, Legg Mason, Inc.’s (LM) board of directors approved an increased quarterly cash dividend on its common stock. The new dividend of 13 cents per share reflects an 18% increase from the prior dividend of 11 cents. The new dividend will be paid on Jul 8 to shareholders of record as of Jun 11.
The dividend raise is part of Legg Mason’s commitment to increase shareholders’ wealth. The company is effectively deploying capital through share repurchase and dividend hike. In fact, Legg Mason has been increasing its dividend consistently since 2010.
Prior to this revision, in Apr 2012, the company announced a 37.5% hike in its dividend to 11 cents. Previously, in Jun 2011, Legg Mason raised its dividend by 33.3% to 8 cents. Moreover, in 2010, the company hiked its dividend twice, in June and in December.
We believe that Legg Mason has the potential to outperform its peers in the long run, given its diversified product mix and leverage to the changing market demography. However, in the near term, asset outflows will remain a significant headwind. However, we foresee improved operating efficiencies for Legg Mason from its restructuring initiatives and cost-cutting measures.
Legg Mason is expected to announce its results for the fiscal fourth-quarter (ended Mar 31) on Apr 30. The Zacks Consensus Estimate for the quarter is 58 cents per share. The Zacks Earnings ESP (Read: Zacks Earnings ESP: A Better Method) for Legg Mason is +16.97%. This, along with its Zacks Rank #3 (Hold), makes us confident of a positive earnings surprise.
Other asset managers that are performing better than Legg Mason include Apollo Global Management, LLC (APO), Virtus Investment Partners, Inc. (VRTS) and Waddell & Reed Financial Inc. (WDR). All these stocks carry a Zacks Rank #1 (Strong Buy).
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