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The board of Franklin Resources, Inc. ( NYSE:BEN ) has announced that it will pay a dividend of US$0.29 per share on the 15th of July. This means the annual payment is 4.7% of the current stock price, which is above the average for the industry.
Franklin Resources' Earnings Easily Cover the Distributions
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, prior to this announcement, Franklin Resources' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
EPS is set to fall by 19.8% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 43%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
The company has a long dividend history, which has its payouts grow consistently over the years. Since 2012, the first annual payment was US$0.33, compared to the most recent full-year payment of US$1.16. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. Franklin Resources has grown distributions at a rapid rate and has good outlook for the future.
Franklin Resources May Find It Hard To Grow The Dividend
Earnings have grown at around 3.3% a year for the past five years, which isn't massive but still better than seeing them shrink. While growth may be thin on the ground, Franklin Resources could always pay out a higher proportion of earnings to increase shareholder returns.
In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The payout ratio looks good, and the company's long and stable dividend history provides a good indication of the company being a good investment for those seeking returns through dividends.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, Franklin Resources has 2 warning signs (and 1 which is concerning) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.