Franklin (BEN) Hikes Dividends, Announces Share Buyback Plan
Franklin Resources, Inc. BEN announced a quarterly cash dividend of 31 cents per share, indicating a 3.3% sequential increase. The dividend will be paid out on Jan 12, 2024, to stockholders of record as of Jan 3, 2024.
Beside this, BEN’s board of directors authorized the company to repurchase 27.2 million shares of its common stock. This is in addition to the existing authorization, of which 12.8 million shares remained available for repurchase at November end. With the increase in share repurchase authorization, the company has up to 40 million shares available for repurchase.
Prior to this, it announced a 3.4% hike in the common stock dividend in December 2022. Impressively, BEN has raised its dividend every year since 1981. Also, it has a five-year annualized dividend growth rate of 3.5%. Currently, the company's payout ratio is 46% of earnings.
Franklin has a decent balance sheet. As of Sep 30, 2023, the company had a debt of $3.05 billion, which has been relatively stable over the past few quarters. The company’s liquidity (comprising cash and cash equivalents, receivables, and investments) as of the same date totaled $5.87 billion. Thus, a decent liquidity position and earnings strength reflect a lesser likelihood of defaulting on interest and debt repayments even if the economic situation worsens.
Given a robust capital position and lower dividend payout ratio than its peers, the company is expected to sustain efficient capital distribution activities. Such moves are likely to drive shareholder confidence in the stock.
Organic growth has been a key strength of Franklin over the years. Though revenues declined in fiscal 2023, it saw a compounded annual growth rate (CAGR) of 8% over the last four fiscal years (ended fiscal 2023). The company’s relatively strong distribution platform has increased diversification in flows across funds, vehicles and asset classes, as well as key businesses growth.
The company has been an early entrant in many foreign markets, enjoying a first-mover advantage. Hence, growth prospects bode well for the firm since the company continues to diversify its business to muster broader sources of revenues. Though we estimate revenues to decline 1.4% in fiscal 2024 on a challenging operating backdrop, the metric is expected to rise 3.9% and 3.3% in fiscal 2025 and 2026, respectively.
In the past six months, BEN shares have rallied 2.8%, compared with the 13.5% rise of its industry.
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Currently, BEN carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Other Banks Taking Similar Steps
United Bankshares, Inc. UBSI announced a hike in its quarterly dividend for the 50th consecutive year. The company declared a quarterly cash dividend of 37 cents per share, marking an increase of 2.8% from the prior quarter. The dividend will be paid out on Jan 2, 2024, to shareholders of record as of Dec 8.
Richard M. Adams, Jr., UBSI’s chief executive officer, stated, "Fifty years of dividend growth is a testament to our proven track record as a high performing company with a low risk profile."
U.S. Bancorp USB declared a quarterly cash dividend of 49 cents per share, marking an increase of 2.1% from the prior quarter. The dividend will be paid out on Jan 16, 2024, to shareholders of record as of Dec 29, 2023.
Prior to the recent hike, USB raised its dividend in September 2022 by 4.3% to 48 cents per share. Also, the company has a five-year annualized dividend growth of 5.7%. Currently, its payout ratio is 42% of earnings.
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